Teaching Kids About Money: 10 Tips Windham ME

Parents have been giving financial advice to their children for ages. "Neither a borrower nor a lender be," Polonius told his son Laertes in William Shakespeare's Hamlet. As with good hygiene and good manners, most parents strive to teach their children lessons on how to be good at handling money.

"If you can teach your child the difference between needs and wants, how to budget and how to save, your child will know more than many adults," according to Scott Reeves of Forbes. "But if you get it wrong, your child is likely to join the millions of Americans who rack up huge credit card debt and get stung each month by stiff interest payments."

In other words, no pressure.

The lives of children who understand money, its value and how to handle it will be far easier than those of children who don't.

Here are 10 tips for teaching your kids about money, focusing on saving and investing money, so they will grow up and use it responsibly.

1) Encourage entrepreneurial spirits

One of the best ways for kids to learn about money is for them to learn the true value of a dollar. They can best do that by earning money. Once they realize how hard they have to work in order to earn money, they will appreciate its value and not spend it recklessly.

"It also creates a sense of accomplishment," Reeves said.

Some common ways for kids to earn their own money include mowing lawns, setting up a lemonade stand and walking dogs. These skills can also help kids later in life by inspiring them to start their own businesses.

Allowances can be part of a budget that parents create with a child 2) Give them money

This may sound counter-intuitive. Sit down with a child and figure out how much their expenses are. This can be broad, such as food and school clothes, or it can get into details as fine as the percentage of the electric bill they are responsible for and fees for field trips.

Once the figure for what they need is established, come up with a figure for what they want. This can include everything from eating out to iPods and more.

Give the kids the money they need, along with their budget of how much has to be allocated to certain areas. By having a set amount of money and knowledge of how much the things they need and want cost, kids will learn to recognize value opportunities. If they can save some money by buying a less expensive shirt, for example, they can put that money aside for an item on their wish list.

This can be an effective teaching tool because kids can "learn about pricing, brand names and how to find the best deal for the money," according to Forbes.

3) Teach them critical thinking

While not directly a lesson in money, kids who learn how to think critically will make better decisions when it comes to money because they will be able to consider the short, medium and long term effects of their decisions, as well as plan for contingencies.

One great way to teach them how to plan, strategize and th...

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