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Teach your children personal finance during the holidays

Here are four tips to teach your children about budgeting, saving and spending

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Black Friday shoppers in California.

Black Friday shoppers, wearing face masks, carry bags at the Citadel Outlets in Commerce, Calif., Friday, Nov. 26, 2021. Holiday shopping is a good time to teach children about finances.

Ringo H.W. Chiu, Associated Press

Holidays are a great time to appreciate what you have and give to others. It’s also a time that most adults struggle to budget when the expenses of Christmas presents and holiday travel pile on — becoming the perfect time to teach your children about budgeting.

Tyler Martin, founder and certified business coach at ThinkTyler, said that giving “your child a certain amount of money to spend on gifts for others, with the caveat that they sit down with you to create a budget. Your child will learn the value of making sensible financial decisions,” according to GoBankingRates.

In this process, your children will learn — through trial and error — what they can buy and what they will have to leave behind.

“Younger children may have an easier time grasping this notion if the money is given to them in cash. Assist them with dividing money into piles so they can see how their money will be spent,” said Martin.

As an incentive, they can always do chores around the house to earn more money, which will teach them how to value it.

Here are some tips to help you get started.

Offer tips at the right time

It’s important to remember that your child may not grasp intangible concepts if they are younger. If they are old enough to understand, find ways to involve them in planning, according to Rocket HQ. Parents.com said that children between the ages of 6 to 8 can be introduced to bank accounts and saving. It's OK to go into detail though it might not be necessary to explain concepts like 401(k) accounts.

Recommend using physical money

Carrying physical money will help your child understand how to use it. If they make the decision of spending it all in one place, let them because that, too, is a great lesson to learn about budgeting and saving, according to MSN News. How much you give them in cash isn’t important, even a little goes a long way. Remember, your children will be excited just to receive the gift.

Budgeting 101

As you start to budget for your Christmas shopping list and other holiday plans, involve your child in the process. Try to create a budget with your child, working through how much each category needs. According to Rocket HQ, ask them who they would like to shop for, explaining that they can only spend a certain amount of money so everyone can get a gift. As previously mentioned, if they go over the budget at some point, it can be a valuable lesson to learn.

Shopping safely online

Since most people shop online these days, it's important to teach your child how to avoid fraud and compare prices. “Because so much of today’s holiday shopping — especially in a post-COVID economy — takes place online, you also need to teach your children how to shop safely and avoid fraud threats. It’s great to have a budget and it’s important to learn how to comparison-shop, but if you lose all your money to hackers, your Christmas will be ruined,” said Monica Eaton-Cardone, co-founder and COO of Chargebacks911, a FinTech company, according to GoBankingRates.

Focus on giving

The holidays are a great time to show the power of giving. Encourage them to shop for presents they can donate to organizations with honorable causes. According to Rocket HQ, these experiences will help your child learn to be grateful for what they have while feeling good about the donations they made.