4 Ways to Give Your Kids a Healthy Relationship with Money

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You want the best for your kids, and that means setting them up to have happy, healthy lives as they get older.

But while you're teaching them how to be polite and how to eat well, you may be neglecting one major skill they'll need to know: how to cultivate a good relationship with their money.

Here are 4 ways you can start instilling good money habits in your child now, no matter their age.

1. Instill the Connection Between Money and Work

When your child is an adult, she will need to work to earn a living. Money will not be given to her "just because," out of thin air. Yet when adults give children allowances without requiring them to earn the money, it's possible that adults teach children that money appears for no reason whatsoever. This runs the risk of instilling an entitlement complex.

Help your child understand that money is earned as a result of hard work. Establish a baseline of chores around the house that she's expected to perform without pay, like making her bed and putting her toys away. Assign additional specific chores that she must complete in order to get her allowance. This will also help her be smarter with his money; people tend to be more diligent with money that they had to earn (and associate with that level of effort).

2. Teach Them How to Budget

Help your child understand her money isn't just for spending now, but that it can help her create opportunities in the future.

An easy to way to teach this is by setting up three jars or piggy banks that represent different goals — one for spending, one for savings, and one for charity ("sharing").

When your child receives money, help her divide it up between these three goals and explain why each one is important. Getting her into this habit now will help her make smart use of money as she gets older.

3. Teach Them the Difference Between Wants and Needs

Every child has uttered "But I need it!" when it comes to the latest hot toy or gadget. Gently correct your child and help him understand when something is truly a need and when it's merely a want. Explain that money should be spent on needs first, and on wants only if there's enough room for them.

4. Make Frugality Fun

Part of teaching your child good money stewardship is teaching them how to be frugal—to find things on sale, to delay unnecessary purchases, and on occasion, to go without. This can make frugality seem like a bad thing, so combat this by turning it into a game.

How much money can you save at the grocery store? How many school supplies can they get for X dollars? If you hold off on buying Y now, will you be able to afford Z later? By turning it into a game, frugality becomes a fun challenge your kid will want to take part in.

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