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Sometimes your child will dispense a small tidbit of wisdom or state an intelligent fact, and you’ll wonder just exactly how did someone so young suddenly get so smart? But no matter how smart your child might seem, they are bound to have some misconceptions about money if you don’t start teaching them about it.
There are several important money facts you must be sure to teach your children, and doing so even while they are very young will instill in them a great amount of financial wisdom that may aid them greatly in the future.
Money didn’t grow on trees when you were a child, and it still doesn’t. Teach your children that in order to earn money, they have to work for it. Not only will they better understand why mommy and daddy have to go to work every day, they’ll also realize that work has value, especially a job well done. (And maybe they’ll get why you want to land your dream job.) Most importantly, they’ll realize that money isn’t some magical paper that everyone has an infinite amount of.
Teach your children that some things cost a lot more than others and that you or they won’t always have enough money to purchase something. This is a great introduction to learning how to save money. It also paves the way for teaching them about priorities and the differences between “need” and “want”, such as food and bills over luxury items such as toys or a weekend getaway.
As children grow older, they may want several things, such as guitar lessons, or they may enjoy going to the movies once a week. If they are earning an allowance for doing chores around the house, or even earning money doing yard work for the residents of the neighborhood, you can teach them how to plan a weekly budget for the different things they want.
It should always be stressed how important it is to save for the future. Your children might not yet be able to fully grasp the concepts of interest, investments, car loans, down payments and mortgages, and retirement—but you can certainly make them aware that if they put some of what they earn aside into a savings account, more money will be added to it over time. As they grow older, you can explain saving in more detail.