One of the most important life lessons you can teach your children is how to manage money responsibly. According to Dave Ramsey, author of "Financial Peace," bankruptcy rates are increasing at a dangerous speed. The money skills your children learn when they're young can prevent them from adding to those bankruptcy numbers when they become adults.
Make Allowances Learning Experiences
Receiving an allowance is the first formal experience your child gains with money and presents an easy opportunity to teach him how to manage it. Explain where the money comes from so your child begins to understand that in most cases---barring a lottery win or inheritance---money is earned.
Tie Allowances to Saving
To drive the message home about savings, you can give your child her allowance on the condition that she saves a percentage of it each month. Teach your child the importance of setting financial goals and saving for them, advises Family Education. It increases financial responsibility. Take your child to the bank to open her first savings account at an early age, or encourage a teen to deposit money into a money market fund to grow more quickly.
Encourage Your Child to Earn
Make your child work for part of his allowance as a practical lesson in earning money. According to the "Wall Street Journal," you should give your child a weekly allowance and offer him a reasonable bonus for any extra chores he does, or make him work for a percentage of the allowance. Working to earn the money will make him more likely to appreciate it.
Teach About Needs and Wants
Children need to learn early that they cannot have everything they want. Helping them to distinguish between needs and wants prepares them for making good financial decisions in the future, explains Family Education. You can explain that needs are items and services, such as food and electricity, while wants are junk food and video games.
Make Money Education Fun
Talking about money doesn't have to be boring and tedious. When your children are young, use board games like Monopoly to teach basic money management, advises Lisa Caputo and Linda Descano of Women & Co., a division of Citibank. While you're shopping, ask your child to compare prices. Show a young teen how she can get more for her money at sales or let a pre-teen clip coupons from the newspaper.
Be a Good Role Model
Set an example of managing money responsibly, advise Caputo and Descano. Let your child see you going over the family budget each month, which teaches him the importance of living within his means. Show him how you pay bills on time to avoid late charges or point out that you pay with cash to save money instead of using a credit card. Caputo and Descano also advise fostering a healthy attitude to money by not using it to compare yourself to other families.
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