Teaching children the true value of money is more important than ever in the current economy. The heady economic wave of the late nineties and early 2000s is over, and every financial page in any newspaper has been covering stories of gloom and doom virtually nonstop for the past five years. Some of the most heartbreaking stores involve those who overused credit cards or gambled on mortgages that they are unable to pay off.
A lot of these problems were caused by an unrealistic attitude toward money. We’re not saying that you have to teach your children to be spendthrifts, because after all, money is meant to be spent. However, it should be spent wisely and with careful forethought – and the stereotype of the miser who lived through the Great Depression isn’t exactly a flattering one. The issue is being able to give your kids a realistic impression of money, how it works, and why it is so important to spend reasonably and save often.
The Home Bank
Part of the problem is that kids often have no concept of a bank and what it does until their mid to late teens. Often, this is far too late and many children have already developed unhealthy spending habits by this point. After all, if their primary association with money is a five-dollar allowance that they promptly run out with and buy candy, how are they supposed to truly grasp why saving money is important? It’s not as if they’re facing any real consequences if they go on a sugar binge as opposed to saving their hard-earned dollars, right?
Many parents try the approach of bribing their children with rewards – the old “if you save your money, you’ll be able to buy that video game/electronic/toy that you want, and won’t you be happier then?” No, Mom and Dad, not necessarily. Particularly not if you end up buying them the item they covet during their birthday or over the holidays or just because you feel like it one day.
Instead of taking the “pie in the sky” approach to teaching your children about money, many parents have found success in creating a “home bank” that encourages saving by means of interest. Consider this: give your child five dollars a week in allowance. When you do this, tell them that for every dollar of the allowance that they manage to keep until next week, you’ll give them an extra quarter.
This might not make too much sense to your child at the time, but assuming that they spend three of the five dollars, they’ll quickly learn to associate the fact that when they save money, they get more of it. It will become more and more apparent after a couple of weeks – the more money they keep in the “home bank,” the bigger their allowance is!
The home bank is a great way of encouraging kids to save. Give it a try.