Here are some tips for teaching kids about money to help them build the financial skills that schools aren't teaching.
Teach them that life isn't free
Chores can be a great way to not only teach kids to contribute because they are a part of a family but also a great way to teach the value of a dollar and work ethic in the form of an allowance. It's important that you set expectations and talk to your kids about the difference between daily chores that are expected of them and the additional allowance earning chores. For example, making beds, tidying rooms and doing school work might all fall under the daily "expectation" chores while mowing the lawn, folding laundry and helping with more specific one-off chores might fall under "allowance". However you define these, it is important that you make it clear to your children and ALSO hold them accountable for their performance. If you ask one of your kids to load the dishwasher, and they do a poor job, you should have the option to ask for a redo or withhold the allowance until the job is done right. This will pay off when your child is a teen and working their first job.
Offer Saving and Spending Guidance
Give your kids either a bank account or document their savings strategy and split this money into three sections: one for spending, one for saving and one for giving. Explain to your kids what each category is for and why setting money aside in each of these categories is important. Kids should learn that not only does money and the purchases that they make with it carry value, but it can also have longer term effects.
Create A Simple Budget
Children, by nature, are a little short sided. This need for immediate gratification is only fueled by the increasingly technological society that they are growing up in. It's often hard for them to understand the concept of their future when their most important concern is the release of their favorite Netflix show that week. Help them set future goals that they can reasonably attain in a relatively short period of time. Financial goals should help kids work toward specific rewards such as a video game, toy or special experience. By giving your child something to look forward to, chores become a priority and your kids are less likely to waste their allowance of cheap stuff.
Teach them How to Negotiate
This is often overlooked but this is a crucial skill that will be needed when looking to their future. Allow your child the chance to discuss his or her current allowance and chores, to give them the ability to negotiate a better rate. As they advance in their adolescent careers they will begin to see that this negotiation has tradeoffs (increased responsibility and/or chores) and by listening to their concerns you make them feel included in the family finances.
Give Positive Reinforcement
Positive reinforcement is one of the best ways to teach your kids about money management. When your kids do their chores and spend their money wisely, let them know your recognize their smart behavior. Try and keep your praise specific to certain actions so they can clearly delineate the actions that warrant praise.
The way you choose to teach your kids about money is ultimately up to you. Different financial situations warrant different tactics of financial education but the most important concept is that, well, you teach your kids about money to help prepare them for their financial future.
Continue their Education
As your child becomes a teenager, they'll know the basics of banking - but it's never too early to teach them how to invest wisely.