Financial Literacy for Kids: 4 Essential Money Management Skills

Many adults regret mishandling their money and wish they were taught money management skills early in life. If that's you and you're a parent, make sure you teach these vital skills to your children. Help them avoid mistakes with their personal finances and teach them to thrive financially by using the following 4 methods:

1. Allow Them to Earn Money at Home

Your children won't understand or learn money management skills if you give money to them freely all the time. Provide them with opportunities to earn money as soon as they're able to do chores. Don't pay them money for necessary, ordinary chores that teach them how to be responsible, clean, and helpful in the household, such as making their beds or putting toys away. Pay them for outside chores or odd jobs that you normally take care of but can't get to. Have them keep a record of these special chores, the dates and how much they earned. Set aside one day a week or every two weeks to pay the total due.

2. Teach Them Unit Pricing

Teach your children how to calculate the unit price of every item you purchase at the grocery store. They'll learn money management skills and improve their math abilities at the same time. Most stores list the unit price on the retail price labels in the store aisles, which makes it easy for children (and you) to check their work. The next time you get a sales flier from your favorite supermarket, circle the items you plan to purchase and give your children an assignment to find the unit price of items on sale versus the regular price. This is the perfect opportunity to give them their own money management tools, such as a calculator and a notebook, if they don't already own them.

 3. Let Them Participate in or Run a Small Business

Children ages 7 and up are capable of assisting in the family business, and some can start their own. If you run a family business, find ways for your children to help with financial aspects. This can include entering payments and bills in a business software program, working the cash register at conventions and helping you to create a budget for the business. Take into consideration the age and abilities of your children when assigning them business tasks, and don't be afraid to challenge them. There are teen entrepreneurs who are making enough money in their business to pay employees while saving for higher education.

4. Make Them Keep the Books

Train your children to use personal money management software, like Quicken. Then, make them responsible for tracking income and expenses for the household. Teach them to balance the books, how to run reports and how to analyze how the household is doing financially. Money management, critical thinking and computer skills will be rolled into one. They'll also get to see where the money is going, and it will give them a higher appreciation for the need to earn and spend money wisely.

Even if you haven't always handled money the way you wish you had, you can help your children enjoy financially successful futures. Prepare them well with these 4 ways to learn how to handle money.