Teaching how money and consequently how the home economy works is an important lesson for parents to impart to their children. Here are the lessons parents can teach their children:
- It is important for parents to explain to their children how debt works. This can happen when children understand the impact that debt has on saving and spending. Sometimes the need for instant gratification is what lands us in debt. It could make us spend today what has not been earned and a child should be made to understand how this could impact the long term finances of a family, their ability to save and future spending ability.
- Children should be made aware of the value of each dollar by way of an Award System, such as the allowance. The allowance could be made to be dependent upon certain factors, such as chore performance, etc. This way the concept of earning money and then spending it; as against simply getting it and spending it is highlighted.
- Children should be made to understand how money is earned (the difficulty of doing so) and how it is used in everyday life (its necessity for a myriad different things)
Lessons in micro economics taught to children now will stand them in good stead later in life.