1. Learn About Money
If you aren't a financial genius and need help with your own finances, you need to learn how to work with money before you talk to your kids about it. Find books by people with reputations for helping people better understand and manage money, such as Larry Burkett, Howard Dayton, Dave Ramsey and Robert T. Kiyosaki. Read several authors to get a well-rounded view of working with finances. As you study, list important aspects of managing money you think your kids need to know and start practicing better money management. The best way to teach your kids is by example.
2. Plan Intentional Conversations
As a parent, you should have intentional conversations about many different aspects of life, including money. Schedule time to talk about how money impacts your life and your child's life. Ask your child about her views of money and how it should be used and managed. Explore and discuss your own successes and failures in managing money. Share what you have learned from books and magazines. You can go through a book together if your child is old enough to understand the concepts in a money-related book. You should discuss principles and chapters in the books and assign reading to be done.
3. Play Games
Children learn best when they are having fun. Some games are a great way to introduce conversations about money, such as Life, Monopoly and Advance to Boardwalk. While playing the game, ask why your child makes the investments he chooses. Help the child to understand investments and return on investments through the course of the game. You can also address budgeting and various expenses people have to meet.
4. Use Allowance and Credits
As your child gets older, you can set up a system of allowance and credits. The allowance is cash your child can spend on the things she needs and is based on money earned. Funds can be earned by getting good grades, doing chores and obeying rules. Credits can be earned in the same way actual cash is earned but the credits are only used at home to help cover living expenses. For example, cleaning the bedroom and vacuuming the house may earn $10 cash and $50 in household credits. Your child will use the $50 credits to help pay her portion of the household bills. Help your kids realize how working, budgeting and paying bills works by planning how allowance and household credits are earned and spent. If enough household credits aren't earned to pay the bills, the penalty can come from the actual cash at an exchange rate you determine. Don't bail the child out or you will teach her the wrong lesson.
