Money isn’t always easy to come by. Therefore it’s important for kids to learn how money works and what it can do for them, so they can grow up with a good understanding of the world around them.
Money management for children is an essential life skill that will help shape their future, one where financial security is attainable through hard work and determination.
The best things in life may be free—but most things cost money. Buying toys, video games, food, or really almost anything—costs money.
Being aware how much money gets spent will help kids make wiser decisions.
What Should I Teach Kids About Money?
You should teach your kids two main skills when it comes to money.
The ability to identify money and the value it represents
The ability to use money and make change.
Very basic to adults, but children learning about banks and money won’t know this without someone there to teach kids about money.
1. Show By Doing and Being an Example
Money habits form early, even as young as seven years old. Be mindful that kids are watching your decisions on how to manage money.
You’ll want to remember this as you think about ways to teach your kids important money skills for developing their financial education and financial literacy.
2. Show Them The Cost Of Money
Simply saying something doesn’t always convey meaning. Actions speak louder than words. Let your kids handle the cash and change they receive when at the store.
3. Start Saving Money now
Saving only gets harder as you wait. Not building those habits early makes them more difficult to adopt later in life, especially as you get accustomed to taking other actions with your money.
Consider using clear piggy banks to demonstrate how much they’ve saved. Once a year, you might consider cashing in and bringing all this change to your bank to deposit it into a savings account for kids.
Conclusion
If you don’t teach your children how to manage money, they might learn bad money habits from observing other people’s poor behaviours. As a parent, you want your children to be on the best possible path you can control, not one set by someone else!
Good money habits begin with the basics and, hopefully, lead to a way of thinking about money that will last a lifetime. Here are some ideas you may want to use for teaching kids about money:-
1. Understanding needs vs. wants. Your child may think they “need” a new toy, but as parents, it is our job to help our children understand it is actually a “want.” That is a very important first lesson that can be applied throughout a lifetime as a foundation of smart money management.
2. Nothing in life is given – if you want something, you have to work for it. Working hard is how you get what you “want.” Start your kids on an allowance at an early age and help them understand that to be able to do the things they want to do, they need to earn that right by working for it.
3. As your children get older, teach them that money is earned by providing a value. The value can be in creating a new product that people like to use or simply by providing a service that people are willing to pay for – washing cars, moving lawns, etc. Almost all successful entrepreneurs got their start by figuring out how to earn money from their neighbors and friends.
4. Pay yourself first. Teach your kids that every paycheck you earn is a way to secure your future. It is important to contribute 10 – 20% of what you make to yourself in the form of automatic savings. If you wait to save what is left after you pay your expenses and satisfy your “wants,” you most likely will not save anything at all.
5. Illustrate the power of investing and compounding interest. Earning money on your money is the most powerful way to compound wealth and is how the wealthy get wealthier.
Did you ever think to yourself, “Geez, if I had only learned all this stuff about budgeting, not using credit cards, saving, and investing BEFORE I got money then maybe I wouldn’t have found myself trying to get out of such a financial mess?” I know that’s crossed my mind more than once!
And you’d think since I am a money management coach that my kids are on top of it when it comes to all the financial decisions they need to be making (NOT! They are still typical kids, but I keep trying!). Just in case you have better luck, I’ll share some of my best money management tips for kids.
Money Management Tips for Kids
Want to know a secret? It’s not too early to start teaching kids about money. One study showed children as young as seven start to become aware of financial habits. The good news is, teaching financial savvy really isn’t too hard!
All you really need to do is spend less than you earn, stay out of debt and invest for retirement. Sure, there are some other minor details along the way, but you can accomplish a lot with just those three foundations.
How do I teach my child to save money?
There’s a popular saying that kids will learn what they live. In other words, it’s more likely they will follow your example rather than follow your advice. This is true in all things, but especially with money. You can’t preach that your child save and budget while you are reckless with your spending and run up credit card debt.
You can help your child by talking with them about their wants and their needs. Obviously many, if not all, of their needs are going to be provided for by you but help to guide them through this process of making the distinction. This is also a good opportunity to talk with your child about their money values and how they can prioritize what they will be choosing as more or less important when making budgeting decisions.
As a parent, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys or coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.
The question, then, is whether you’re teaching your children a key lesson that will impact whether they will do well. That lesson is about money.
“Without a working knowledge of money, it is extraordinarily difficult to do well in life,” says Sam X Renick, co-creator of Sammy Rabbit, a children’s character and financial literacy initiative. “Money is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.”
Yet, plenty of parents aren’t helping their kids become financially literate. T. Rowe Price’s 11th Annual Parents, Kids & Money Survey found that nearly half of parents said they miss opportunities to talk to their kids about money and finances. And a quarter said they are very reluctant or extremely reluctant to discuss financial topics with their children.
Kids, on the other hand, are eager for their parents to share their wisdom. Half of the children surveyed said they wish their parents taught them more about money.
Even if you’re not teaching your kids, they will learn lessons about money one way or another. If you want to play a key role in shaping your children’s feelings, thinking and values about money, you need to give them the gift of financial literacy from an early age. Here’s how.
Start With the Basics at a Young Age
Renick has been teaching kids about money through his Sammy Rabbit storybook character since 2001. He has found that the earlier you start a child’s financial education process, the better. Lessons should begin before age seven, he says, because research shows that money habits and attitudes are already formed by then.
Once your kids are old enough to know they shouldn’t be sticking pennies in their mouths, you should introduce them to coins and cash. Explain what money is and how it is used. Actually, showing them how money works is more effective. So let them see you making purchases with cash.
Even if you pay with a debit or credit card, explain to your kids that you’re using your money to make purchases. Chase Peckham, director of community outreach for the San Diego Financial Literacy Center, did this with his son and daughter when they were preschool age. When they shopped together, Peckham would show his kids receipts with the amount he paid. “By doing it over and over again, it became habit to them,” he says. “As they got older, they started to understand. That’s how we introduced money.”
Peckham says that his son understood how money worked by the age of 4, thanks to the receipt strategy. He had more trouble getting through to his daughter. But, by being consistent, he knew that “the light bulb would turn on” for her—and it did.
Instill a Habit of Saving
Your kids’ early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. So it’s important to teach them from a young age that money isn’t just for spending—they should be saving money regularly, too.
Learning to save isn’t just an essential money habit. “Saving teaches discipline and delayed gratification,” Renick says. “Saving teaches goal-setting and planning. Saving stresses being prepared. Saving builds security and independence.”
Help your kids get in the habit of saving by giving them a piggy bank or savings jar where they can deposit coins or cash. Then use short, simple messages to encourage your kids. Renick offers these examples:
Saving is a great habit.
I love to save.
It feels good to save money and build my future.
With young kids, though, you’ll likely have more luck teaching them to save for short-term goals—such as a toy they really want—rather than for the future, says Tim Sheehan, co-founder and CEO of Greenlight, a debit card for kids with parental controls. The father of four says that encouraging his kids to set short-term goals when they were little helped them learn the value of delayed gratification. As they have gotten older, they are now able to save for longer-term goals.
Parents also can encourage their kids to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage. If your children are old enough to advance from a piggy bank to a real bank, you could take advantage of a service such as Greenlight or FamZoo. These prepaid debit cards and apps allow parents to transfer money to their kids and pay them interest—at a rate of their choosing—on any of the money the kids choose to stash in savings.
Create Opportunities to Earn Money
Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. However, you should consider requiring your kids to do certain chores to earn their allowance. “Just about everyone values money they earn differently than money they receive,” Renick says.
Both Peckham and Sheehan say they wanted their children to learn that money is earned. There are some chores the kids have to do without pay because they’re expected to help out as part of a family. But if they want to get paid, they have to complete certain tasks.
Sheehan says his two youngest children who are still at home get a weekly allowance in an amount equal to their ages. Peckham did that initially with his kids but says they now get a “salary” that is deposited directly into their bank accounts each month. His kids have negotiated raises for their salaries by agreeing to take on additional jobs around the house, he says.
Help Kids Learn to Make Smart Spending Decisions
In addition to wanting his kids to understand that money is earned, Sheehan introduced an allowance system so they could learn to live within a budget. His two youngest children, who are 16 and 11, would constantly ask for money and “spend like drunken sailors,” Sheehan says. When he started paying them an allowance, he told them that was all the money they would get and that it was up to them to manage it.
“Amazingly, it worked,” he says. They track how much they have coming in and going out and how much they’re saving using the Greenlight app. Learning how to budget now will help them when they enter the real world, Sheehan says.
Peckham has allowed his kids to make decisions about their money since they first started earning an allowance. He gave them three jars for spending, saving and giving. Peckham told his kids they had to put some of their allowance in each jar but didn’t specify how much. The decision was up to them.
Peckham also is teaching his kids that spending isn’t always about buying things you want. He wants them to learn that they will have to spend money on things they need when they’re adults and can make the choice to pay people to do things for them. So if his kids don’t do certain things they’re expected to do to help out around the house, it will cost them.
In essence, they’re paying their parents to do those things for them. And the money comes out of their allowance. “I wanted them to make decisions about what they were willing to pay for and what they weren’t,” he says. “I want them to realize, for every choice they make, there will be a repercussion. Personal finance is about decisions.”
Show Kids the Value of Giving
A key reason that it is important for you, as a parent, to teach your kids financial lessons is because you can share your money values through those lessons. If you value giving to others, you can instill that value in your children by helping make it a habit for them from an early age.
You could do as Peckham did with his kids when they were little and create spending, saving and giving jars. The Greenlight and FamZoo apps allow kids to create giving accounts. Or you could help your kids set up a special savings account for giving.
Teach Kids How Their Money Can Grow
Saving money is a great habit. But if you want your kids to learn how to truly build wealth, teach them about investing, Sheehan says. “I’ve tried to pass on this knowledge and insight to my kids,” he says.
All four of his children have custodial investment accounts he set up for them (minors can’t open their own accounts). Sheehan started teaching his two oldest children, who are 20 and 18, when they were young about how they could invest their money and see it grow at a faster rate. He’s still working to get his younger two children to understand. “Some are ready for it at a young age,” Sheehan says. “Some maybe a little bit later.”
If you don’t understand investing well, you could give your kids a book that explains how it works. Renick says his father introduced him to the personal finance classic The Richest Man in Babylon when he was 12 or 13. “That book really motivated me to want to invest and spend less than I earned,” Renick says.
You can help children get started investing by opening a custodial account with a brokerage such as Charles Schwab, E*TRADE, Fidelity or Stockpile. And Greenlight will start offering an investment option with its accounts later this year.
Model Good Financial Behavior
Just as important as the lessons you teach your kids about money are the ways you discuss and handle money when you’re around them. For example, if you complain about having to spend too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages.
Instead, make sure you model the behaviors around money that you want your children to adopt. Renick says that not only would his father encourage him and his brothers to do work around the house, but also he would jump in and help them out.
“Some of my favorite childhood memories are of having my father assist me washing cars and cutting grass,” Renick says. “He would also use those experiences to talk to my brothers and me about the importance of work and managing our money. He would share things like, ‘It is not how much you make, but what you do with what you make, that makes a difference.’”
The habit of saving money may be a crucial life skill, but it’s not one that always comes easy. A 2021 survey by LendingClub found that as many as 54% of American adults were living paycheck to paycheck, with little or no money set aside for future needs.
Families can have good and serious reasons why they may fall into this trap, but the savings habit is an important one to help kids establish when they are young. Teaching them about delayed gratification when it comes to money can help them guard against unnecessary spending and learn to value establishing control of their money.
Discuss Wants vs. Needs
The first step in teaching kids the value of saving is to help them distinguish between wants and needs. Explain that needs include the basics, such as food, shelter, basic clothing, healthcare, and education. Wants are all the extras—from movie tickets and candy to designer sneakers, a bicycle, or the latest smartphone.
You can even quiz them on items in your home to drive home the concept. For example, point out items in their bedroom or the kitchen and ask them whether the object is a need or a want. This allows you to explain the idea that you have to prioritize what you spend money on, leaving some money for future necessities.
Let Them Earn Their Own Money
Two-thirds of parents said they paid their children an allowance in 2019, according to a survey by the American Institute of Certified Public Accountants (AICPA), with kids earning $30 per week on average, based on five hours of chores.2 If you want your children to become savers, allowing them to earn and save money provides them with the opportunity to learn how to use it. When you offer allowances in exchange for chores, they’re also learning the value of their hard work.
Set Savings Goals
To a kid, being told to save—without explaining why—may seem pointless. Helping children define a savings goal can be a better way to get them motivated.
If they know what it is they want to save for, help them break down their goals into manageable bites. If they want to buy a $50 video game, for example, and they get a $10 allowance each week, help them figure out how long it will take to reach that goal, based on their savings rate.
Provide a Place to Save
When your children have a savings goal in mind, they’ll need a place to stash their cash. For younger kids, this may be a piggy bank, but if they’re a little older, you may want to set up their own savings account at a bank or even get a kid-friendly debit card. Cards by the likes of FamZoo, Athenry, and Greenlight notify you when they make purchases and allow them to create their own savings goals.
Have Them Track Spending
Part of being a better saver means knowing where your money is going. Tracking expenditures is a little easier with a bank or debit card app, but you can also do it the old-fashioned way.
If your children get an allowance, having them write down their purchases each day and add them up at the end of the week can be an eye-opening experience. Encourage them to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns.
One way for teaching kids about money and how to save it is by providing a place for them to save. For younger kids, that may mean getting them a piggy bank; older kids can open up a bank account or debit card of their own. You can also pay the interest on what they save, providing an incentive to set aside money for the future.
DEBT CAN BE stressful. That’s why the vital ability to manage money is something most parents work hard to instill in their kids. Allowances, chores, and piggy banks are tried and tested techniques, but in the digital age, there are apps and online services at our disposal for imparting financial wisdom and encouraging good habits. That’s important as cash declines in use, especially during the pandemic.
A good financial life is one of the most important contributors to lifelong well-being, according to Gresham, which is why she says parents should consider a financial education to be as important as academic education.
“Give an allowance and then have your children divide the money into four categories: spend, save, give away, and invest,” Gresham says.
This is a popular approach in the US, promoted by groups like Money Savvy, which even offers a physical piggybank with the same four categories.
Discussing family finances and allowing children to express their opinions on how money is spent can be beneficial, Gresham says. For money lessons to really sink in, kids must have some control and input on decisions. Family finances should be discussed openly, and kids should be allowed to choose how to spend their own money, even if that means they buy something you consider to be a waste.
“A month later, ask your child whether they’re happy they bought it,” Gresham says. “Was it a good value? Did it serve its purpose?”
This helps them to reflect and learn what is worth buying and what isn’t.
Financial Awakening
For the past few months, my family has been using RoosterMoney. The app lets me set a regular allowance for my kids (aged 11 and 8), set a chore list to give them the opportunity to earn a little extra, create savings goals, and give to charity.
As well as earning, they can contribute a little to family expenses for items they really want. For example, my daughter pays toward our Disney+ subscription and my son chips in for Microsoft Game Pass.
Money is divided into different pots, and we match the money they choose to put into their savings pot to encourage them to save. All of this information is clearly laid out in an app we can all access, though parents retain control.
“We’re using technology to make it easier for parents to manage an allowance and keep on top of chores,” says RoosterMoney CEO Will Carmichael. “It helps parents keep track of how much they’ve given their kids over time and what they’ve spent it on.”
My 11-year-old son has a debit card linked to his RoosterMoney account, which he can use when he’s out and about or for online purchases. I get alerts when he spends (debit card support is confined to the UK for now). We still handle purchases for my 8-year-old daughter, but RoosterMoney gives her a running total of what she has to spend. For very young kids, there’s an option to award stars, which can then progress into money later.
“If it’s easier to learn a new language when you’re 4 or 5 or 6 than it is when you’re 30, is that an opportunity with money?” Carmichael says, explaining his reasoning for cofounding the company.
The app has been working well for us, especially since I rarely carry cash these days. My kids like the clarity it provides, and it has undeniably provoked more discussion about family spending in our household. That said, we definitely started much later than Gresham recommends.
Money Apps for Kids
We’ll likely keep using RoosterMoney, but there are many other great alternatives. My brother uses Gohenry with his kids and raves about it. Like RoosterMoney, it allows you to set up an allowance, tasks or chores, savings goals, and more. For $4 per month, you can also get kids their own Mastercard, set specific spending limits, and even restrict where the card can be used.
“The apps that kids should consider are the ones their parents use,” Gresham says.
If you organize your finances in apps like Mint or YNAB, it may take more work to set your kids up with these services, but it could be an easier transition as they grow older.
Whatever app or account you choose, the takeaway is to start teaching your kids about money as early as possible. You may be encouraging good habits that will last a lifetime.
Money affects our lives from the time we’re born. That’s why financial experts advise talking to kids about finances from an early age. Even a toddler can hand money to a cashier.
Teaching kids about money prepares them to be responsible. They also learn the value of working, saving, and setting financial goals.
Here’s how to get started:
Tell them about you. Discuss your financial decisions, including past mistakes, so your child is less likely to repeat them.
Play games. Monopoly and Pay Day are classics. There are also board games that teach kids about stocks and help them build math skills. Younger kids can practice counting coins or making change.
Give them a job. Let kids earn money by doing age-appropriate household chores. As they age, they can walk dogs, mow lawns, or organize a yard sale with friends.
Raise money for charity. Create a fundraiser for an animal organization or other cause. This teaches the joy of sharing money and giving to the community.
Introduce the concepts of credit and interest. Buy something for your child and let them pay you back in installments from their allowance.
Start saving early. Use a colorful envelope or decorate a box as a “piggy” bank. Encourage your child to put some of their allowance in it each time they’re paid.
For kids who see food show up in the refrigerator and gifts magically appear under the Christmas tree, it’s easy to think that money grows on trees. Children don’t always know that everything has a price tag. But being money savvy is an incredibly important life skill, so it’s essential to start teaching kids about being responsible with money early on – the sooner, the better.
While the basics – like identifying money and giving change – are taught in school, it’s often left up to parents to teach kids about money behaviour and values – like saving, spending wisely, and giving to charity. Here are some tips for teaching kids money management and smart spending.
1. Give them some
The best way for kids to learn how to handle money and spend wisely is to give them practice! A time-tested way to do this is by giving them a weekly allowance. When should kids start getting an allowance? When they start to ask for things, suggests Karen Skinulis, parent coach at Parent Talk, so they will have some money to buy the things they ask for.
Make sure you set clear expectations before giving your child an allowance, adds Skinulis. She suggests parents sit down with kids and think about what the child needs the money for and what amount they need so they can actually buy these things. Start out with a small amount for young children, to be used for treats or small toys. As kids get older, think about whether things like electronics, lunch, or clothes should be included, and if a portion of the allowance should be put away for saving or donated to charity.
An allowance is a great tool for both kids and parents. Instead of the child asking Mom or Dad for something, says Skinulis, “the question could then be, do you have enough money saved up to buy that? And if the child does, would you want to spend your allowance to buy it?” This gives kids the opportunity to make their own spending decisions, and parents are able to put a limit on their kids’ spending without being nagged or having to say no.
2. Let them make mistakes
Once kids have some cash, don’t restrict them. Instead, let them make mistakes – and they probably will. “They might spend it too quickly or run out of money,” says Skinulis, “and those are great learning lessons.” They’ll think, “When I spend and it’s gone, I don’t have it for something else. And that’s really the life lessons that we want them to learn: it’s not unlimited,” says Skinulis.
So let them spend their money on candy bars at first. They’ll soon see that if they want that video game, they’re going to have to save up. This will help them learn to delay gratification by saving – an important step in getting kids to really think about their purchases.
3.Take them shopping
Doone Estey, principal at Parenting Network Inc., suggests parents start talking to kids about money in the grocery store, “where kids think you can take whatever you want off the shelves.” Get them involved by having them hold the shopping list or coupons. Teach them how to comparison-shop and find the best value. Ask them for their input on how the grocery budget should be spent.
While grocery shopping is an important activity for kids to understand, be careful when taking kids to the mall. Try to avoid encouraging kids to shop as a ‘just-for-fun’ leisure activity.
4. Model good money behaviour
Skinulis warns parents against buying their kids something every time they’re in a store. “You go into a store with the idea we need something, and just because a child sees something they like, doesn’t mean you buy it for them,” advises Skinulis. Make it clear what you’re going to a store to buy beforehand, and remind them why you’re there.
“I wouldn’t do a lot of impulse shopping in front of them,” adds Skinulis, “because I think it models the idea that I get whatever I see.” Instead, try to show your kids how you make decisions when it comes to money and buying – and this means thinking and researching your purchases before you make them.
5. Help them make a wish list
Once your child has some money, their eyes might be bigger than their piggy bank. Sit down with your child and making a wish list. Then rank the items, encouraging them to research how much each item costs, where they can get it, and how long it will take them to save up for it. This is a great way to help kids learn to make priorities and get them into the habit of planning before they buy something.
Having trouble getting kids to think before they buy without nagging them? Check out Gifting Sense, a free online/mobile survey that asks kids questions to help them learn what to consider before making a purchase – like price including taxes and shipping, and how often the purchase will be used.
6. Ask them to chip in
“Sometimes parents are way too quick to buy things for their kids and not ask the kids to help pay for it out of their allowance,” says Estey. When kids haven’t helped pay for something, they might not appreciate it. And this could lead to a cycle where kids constantly ask for new things that they don’t necessarily take care of.
If an older kid with a clothing allowance needs a new pair of sneakers, Estey gives as an example, a parent might say, “’I’m willing to buy you the $75 sneakers, but I’m not willing to buy you the $100 sneakers, so you need to fill in the difference if you really want these cool [brand-name] sneakers.” This type of exercise teaches kids about the difference between needs and wants, and helps them think about how they want to spend their money.
7. Bring them to the bank
To a child who just sees you taking money out from the ATM, it may seem like the bank just gives out money, says Estey. In order to teach a child about how the banks works, take them to one and open up a bank account for them – most banks have children’s accounts with no fees and no minimum balance. This is an excellent opportunity to talk to them about saving and interest.
Next time they get a cheque for their birthday from Grandma, have them deposit it in their account, says Skinulis. This teaches them how to keep their money safe, not to spend it as soon as they get it, and how to make it grow.
8. Talk about it
One of the most important things to remember when teaching kids about money is to talk about it – frequently and casually. Let kids know that finances are important but also accessible and not scary.
Estey suggests being as honest as possible when kids have questions about money. You don’t have to go into complete family finances, but you might want to talk about bills, investments, credit cards, or even your retirement fund. If they’re old enough, you could even discuss current events relating to the economy around the dinner table.
Kids and money: Teaching kids financial responsibility
Teaching your kids about money and financial responsibility means setting a budget — and deciding what to do when children run afoul of their own guidelines.
One answer is to require them to save their allowances in locked boxes. But since this doesn’t teach restraint and you won’t always be around to oversee savings deposits, there are more instructive ways to make the point.
One method is to make it a game with play money. You can also use various piggy banks to stash away money for different purposes like saving for a certain item, everyday spending, buying gifts, donations, and eventually investing.
If they’ve been receiving your sage financial teachings from an early age, older children shouldn’t have trouble understanding the concepts of long-term and short-term saving. If not, illustrate the concepts by using goals, as with a new video game a month from now versus a bicycle this summer.
Remind them of these goals to keep them from straying.
The more worthy and ambitious the long-term goal, the more you may want to consider matching grants to reward your child’s savings discipline. These grants can be anywhere from 1.25 to 1 to 3 or 4 to 1.
Younger children understandably have trouble grasping off-site savings, so the best mechanism for them is often a piggy bank for coins and a wallet for bills. Count the money with them periodically and tell them how close they’ve come to their goals. Above all, praise their progress.
Once children reach the age of 9 or 10, they’re more amenable to banks. Quantitatively adept children of this age can understand the concept of interest rates. Until they’re old enough to handle a checking account, children may take withdrawals as cashier’s checks or money orders.
The best way to encourage sound spending habits is to exhibit them. When planning a trip to the grocery or discount store, get your children involved in making a judicious list and sticking to it. This will teach them to avoid the bane of all savers: impulse buying.
For big-ticket items, show them how to do the research: reading articles and reviews, comparing prices, negotiating with salesmen.
Doubtless, an occasional purchase will be defective. No problem. Use this to demonstrate the importance of saving sales receipts and reviewing warranties. When you return the goods, take your children along and show them how to overcome salesmen’s arguments.
One of the best ways to teach a lesson is by doing so without your child even realizing that they are learning. Play games that include a financial element like Monopoly or Life and help them strategize during the game. This will help your child learn the importance of budgeting and planning for the future, all under the guise of play.
2. MAKE A WISH LIST WITH YOUR CHILD
An essential part of financial literacy is creating a set of priorities. We can’t have everything we want all at once, but we can achieve our goals over time if we plan ahead. This is a great lesson that children can learn. Sit down with your child and have them list five things they want. Then have them rank them from most important to least important. Once the list is created, strategize with your child about how they can obtain their wishes.
3. TEACH WHILE YOU SHOP
Take your child shopping and actively explain your decision-making process. When you arrive at the store, tell your child how much money you have to spend and what your priorities are. Show them why you are picking one item over another and explain things like discounts and coupons. Remember, children will learn from your example. Telling them about budgeting is important, but it’s much more impactful if they see you following a budget yourself.
Additionally, give your child small amounts of money to spend themselves. You’ll be surprised at how happy they will be to spend $2 on anything they want! They’ll also learn the importance of spending with a limited budget.
4. GIVE AN ALLOWANCE
Giving an allowance gives children first-hand experience with money. They learn the rewards of careful spending and saving and the risks of making impulsive spending decisions. And those risks are a lot smaller than they will be later in life! Kids also appreciate things that they can buy with their own money.
If you’re wondering how much allowance to give, know there aren’t strict guidelines. Some parents choose to give one dollar for each year of a child’s age. Other parents base their kids’ allowance on work they do around the house — like cleaning, lawn and garden chores, or babysitting younger siblings. Some parents put their kids in charge of paying for some of their own expenses — like clothing, video games, or tickets to movies — and set the allowance based on that.
Whatever amount you decide on, keep in mind that it will become a regular expense for you to consider in your family budget. Make it work for you and your child.
5. SPLIT MONEY INTO CATEGORIES
Get a piggy bank that splits money into spending, saving, and giving. Teach your child about what each category is and how they are allowed to use the money in each section. Every time you give them their allowance, talk them through how they plan to use their funds. Place the piggy bank next to your child’s wish list so that their spending and saving goals are clear to them. Also, talk through the charitable causes your child thinks are important, and when they hit a giving goal, donate the money to that cause in your child’s name.
6. INVOLVE YOUR KIDS IN MAJOR PURCHASES
Deciding where to go on vacation? Buying a new appliance? Include your kids in the process and have them help with the research. You can show them the factors that go into making the decision and have them help you compare the options before making the purchase. They’ll feel proud to know they helped with the research to make the best decision for the entire family.
In short, teaching children about finances can be easier than it might seem. It just takes a bit of planning, a little patience, and some creativity. Once your child learns the basics of finances, you can increase their financial responsibilities by upping their allowance and helping them to open a savings and checking account. These lessons will help your child develop a healthy attitude towards money as they grow into adults.
Tim Connolly 