Financial Education For Kids

One of the differences between rich families and poor families is that rich families teach their children how to be rich. However, there are ways to teach any child how to be better with a checkbook. There are, of course, books and sites to help your child create a business and succeed at it. One that comes to mind is "Rich Kid Smart Kid", by Robert Kiyosaki. Also, the famous cashflow 101 for kids board game by the same author is definitely a great start.

Peak the kid interest in making money

Kids can generate their own cash flow. It's just a matter of teaching them the basics and then encouraging them to try things. Before you let them loose, remember to show them a few things. The most obvious thing to show them is the advantages of having their own income. For example, they can buy their own clothes and toys, as well as food. Once they realize that they can pay for things themselves, their interest in making money will be peaked.

Show them where your money goes. Specifically, show them bills, and what each bill buys the household. Also, go over the food bill, and show how much food the family eats on a monthly basis. Although there will be some dispute whether some items (such as Brussels sprouts) should be on the list, and questions as to why others (such as pizza) aren't on the menu more often, you can show them why pizza and other fast food items aren't bought as often because of their cost compared to normal food.

Let them experiment with business

Once you've shown them what money can buy them, and where the money goes, give them a chance to experiment. There are several ways you can do this, depending on how old the children are and what you have available. There are a lot of options for lemonade and lawn-mowing, even though they aren't that bad to start with. They'll probably be more able to do service-oriented businesses, especially those that don't require a lot of skill, such as carrying small loads, babysitting, running errands, weeding, some farm chores, and, yes, lawn-mowing. Some kids even do well with a rent-a-kid service, where older adults just want someone to listen to them, or help them with basic chores.

Once they get their business off the floor, you can introduce the concept of advertising to them, to help expand their business, getting them new customers, to whatever limit you think they can handle. Also, don't be afraid about calling their customers to see how they are doing, just don't get obsessive about it or you may cost the kid customers. The input helps, especially if they have a product that they are selling.

And don't forget to set up a banking account specifically for the child's business. This allows you to show him how banking works, and gets him used to how a balance sheet works; both of these are obviously useful skills later on. The account will also teach the child about interest, and possibly fees, which can be frustrating, especially if the account is usually below the minimum balance. Also, when the business is shelved, the account can continue, allowing it to garner interest; enough interest, and the account can help towards college.

Play with them with "Cashflow for kids"

By creating a business, even if it doesn't last long, the child develops a certain Financial IQ; he knows where the money goes and comes from, how to create it, and has a glimpse into how the world of finance. This insight will be invaluable later on, especially if the child decides to try his hand at business later on. Even if it is just a game, "cashflow for kids" the board game is specially designed to teach kids about being smart with money

Credit: Elie Cole