Teach your Kids how to Avoid the Debt Trap and Build Real Wealth

One of the best ways to teach your kids about money, is to give them an allowance, and guide then in how they spend it.

The typical rule of thumb, for deciding how much allowance your kids get, is to give them approximately one dollar for each year of their age. For example, if your child is 8 years old, then they would receive eight dollars per week. But if this is too steep for your budget, come up with an amount that you can stick to every week.

Make sure to pay them the same day each week, so that they can learn to budget. Set them up with two jars. Get them to decorate each jar, and label them, SPENDING and SAVINGS. When you pay them their allowance, give it to them in small change, that way they can divide it between the jars easily. They should take at least, 10% for savings right away, and then put the rest in their spending. They can now see how much they have to spend for the week.

With the jar system, they will see the money, and will learn that once that jar is empty, there is no more money until pay day, just like us adults have to deal with. If they are wanting something special, then they may need to save up for it, in which case they should increase their savings percentage. You can teach them, that the savings jar is for the bigger items they want to save up for, a special toy, or clothing.. and the spending is for their daily spending, such as treats or an activity

You can get your kids, to create a list of things they want to save up for, and then they can see, that if they spend too much of their money on goodies, and daily things, that it will take longer to save up for those things they really want.

Kids think visually, which means, they work best with things they can see. If you start your kids early with money, let them see it, feel it, see how far it goes, then when they graduate to bank accounts, they hopefully will keep the good habits. I know adults that still use the jar system, that way they don’t go near their bank accounts for spending.

If your child needs to make extra money for something special, then try coming up with a list of extra chores, that you could use a hand with, and put a dollar amount beside them. Put this list on the fridge, and then your child can take on an extra chore, if they want to earn more money. This way they will learn, that they will have to work for the item they want, and may decide the item is not worth it after all.