Children receive very little financial education in school and most of what they learn comes from home. The earlier you start teaching your kids about money the better. Sharing good money management principles prepares them to make better financial decisions (spend smarter, save wisely and live beneath their means) in the future.
5 Ways to Teach Kids about Money:
- The ABC’s of Money – Start with the basics of what money is and why money matters. Focus on telling them how you earn money, what you use money for (home, food) and where you keep money (bank, credit union).
TIP: Using games like Monopoly or a grocery store shopping cash register toy (food with money) helps them understand how money is used.
- Counting Money – Begin teaching your children how to count money when you feel they have reached the age to understand it. Once they know how to count, show them how to make change.
TIPS: Use the money in their piggy bank to show them how to count money (dollars and coins). If they do not have a piggy bank, I’d suggest you get them one to help them learn about money and saving. Put their making change skills into action by having your child help you with a garage sale or buy something at the store.
- Lead By Example – As a parent of two, I’ve learned my actions carry more weight than my words. Children constantly watch what we do and how we do it. Demonstrating strong money management skills like being a disciplined spender, shopping around and managing your budget are great ways to teach your children good money habits.
Personal Story: Leading By Example
During a grocery store trip with my children, I went to customer service because something rang up incorrectly. As we waited, my oldest daughter asked, “Mommy, how did you know the price was wrong?” I told her, “My mom taught me to remember the price of anything I buy.” This experience allowed me to share the same lesson I learned as a child with my daughter – the importance of checking the price, verifying it rings up correctly and raising any issues to the store’s attention. As a bonus, we received a free pack of raspberries for the store’s mistake.
TIP: Explaining the reasons behind your actions improves your child’s learning experience.
- Needs vs. Wants – The words “I want…” are quite popular in a child’s vocabulary. Simply put kids want it all – well, not everything but TV ads and eye-catching things make them think they do. It’s important to define the difference between needs and wants for your child. Help them understand the importance of prioritizing their needs over wants.
Personal Story: Do you really need that?
On another trip to the grocery store (yeah – I know most of my teaching happens in the store), my three-year old said, “I need chocolate milk.” I responded, “You don’t need chocolate milk.” She immediately said with spunk, “Yes, I do!” Then my six-year old replied by explaining the difference between a need and a want — hoping to convince her that she did not need chocolate milk. It was great to hear my oldest daughter’s explanation and I was pleasantly surprised to see they agreed with Mommy Dearest in the end. 😀
- Saving & Allowance – Money and saving is like a movie and silence, because they both complement each other so well. Learning how to save gives your child a foundation for future success in money management. Teaching your kids to save a portion of any cash gift they receive helps them build the habit of saving.
Another great way to help them learn how to earn and save money is to give them an allowance. Encourage your children to save a portion of their allowance. Have them record the money they are saving in a log and use a piggy bank or open a savings account to keep their money.
TIP: Be sure to understand any fees associated with opening a savings account in advance (e.g. minimum balance requirement, withdrawal limits), so that you can earn money instead of lose it.
Do you have any other tips to share on how you teach kids about money? If so, please add them using the comments below.
Photo: Nina Matthews Photography