As kids grow older, they will eventually learn about money with or without your help. However, if you make a conscious effort to teach your children about money, they are much more likely to value it. By giving your child a financial education early, you can help them learn to be responsible with their cash. You also can help them escape the belief that parents have unlimited money if you talk to them about how much things really cost and where money comes from.
In addition to talking to your kids, you can show them by introducing them to the idea of comparing prices and products, and also by having them interact with you at the grocery store or actively save for something at home. In most cases, the more practice that kids have when they are young, the more likely they will actually be able to hold on to their money later in life. Here are a few ways to get started.
1. Make your children work for their money
When your kids are really young, they probably won’t have an allowance or chores. However, as early as 2 years old, most children can do some small chores — think putting their plastic plates in the sink or picking up their toys. While you may want to wait until they are old enough to really recognize money and know what it is before giving them an allowance (at perhaps 4 or 5), just encouraging your children to do small chores around the house is a good step.
Once your child is old enough to understand the basics of money, consider giving them an allowance. Some people are against giving allowances, but if you are open to it, it can be a great way to teach kids about money. Many people give their children 50 cents to $1 per how old they are, per week. If you start when your child is 4, that would mean that they would be given $2 to $4 per week. After you decide how much to give your child, your next decision will be to determine whether your kids will automatically get the money.
Children will learn the value of money very quickly if they must work for it, and chores are a great way to teach them that value.
2. Teach your children to save
You can begin teaching children to save their money at a very young age. If your 5 year old wants a Lego set that costs $20 but they only earn $5 per week, explain to them that they will need to save up for four weeks. While they may not understand that each dollar is worth 100 pennies yet (and so on), they can understand that different toys cost different amounts. You can make this clearer by comparing toys in a toy store. If you hold up the $20 Lego set next to a toy car that costs a $1 and discuss it with your child, he or she will start to understand.
Many children don’t quite grasp the idea of saving when they are young, so you may have to remind them and encourage them. One great way to have them tangibly see the savings is to use a savings jar. Each week that they get their allowance, you can encourage them to put the money in the jar and then remind them how many more weeks, days, etc., they need to save for.
You could also consider matching their savings when you think that that they are making a good investment. If you do this, make sure to explain why the investment is a good one — for example, if they want to save for a well-made toy versus one that will break quickly. When they are older, you can also encourage them to start putting some of their money in the bank or set a specific weekly or monthly requirement.
3. Help your child learn to respect property
You can teach your children a lot by encouraging them to value their own property and the property of other people. If children grow up caring about the things around them (besides just wanting to accrue as many toys as possible), they will be more careful with money. Teach your child that they must respect their own things and that they can’t purposely break a toy. Teach them to respect other people’s belongings, as well.
The way you teach your child this lesson will depend on his or her age. If you have a toddler, you can approach this several ways: You may try to play make-believe — “When you throw Teddy across the room, it really makes his arms and legs hurt. Wouldn’t it make you sad if Teddy broke?” You can also teach toddlers to respect property by taking away the toy or other item if they mistreat it: “Teddy goes away when you throw him,” or “If you hit a fork on Grandma’s table it might scratch, so no more fork.”
We’ve all heard the “you break it, you buy it,” phrase. Older children can learn to respect property in several ways as well, but one of the best ways is to make them pay for (at least part) of the cost for replacing broken items. Obviously a 7-year-old will not have enough money to replace a lamp or other expensive piece, so use your judgment when making an appropriate consequence.
4. Set a good example
Most younger children enjoy emulating their parents, so if they see you saving, they will also want to save. You can set a good example by having your own savings jar for fun activities. Another great way to set a good example is to talk to your spouse about money in front of your kids. You must be careful about this though, because you don’t want to worry your kids by talking about serious financial troubles. If you talk about financial goals in an easy way that they can overhear and understand, that is a good start.
Also, talk to your children directly about money and let them interact with you about financial matters. Let your kids add reasonable items to your grocery list. At the store, show them two similar items with different prices. Explain to your children that some brands cost more. Allow your child to help you put fruit or vegetables on a scale and explain that you sometimes pay for the amount of food you buy and that using the scale helps you see how much you will spend.
5. Make learning about money fun
Most kids will be more interested in learning about money if you make it fun for them. Consider making or printing a savings chart for your child. Encourage your child to help, either by getting out the chart whenever it is time to set money aside, or if you have a child who can write, allow them to write in the numbers themselves. Also consider checking out one or more of the various online videos designed to make saving fun for kids.
One great video is “For Me, For You, For Later”; because the film features Elmo, music, and bright colors, it is an entertaining way for young kids to be introduced to money. Also consider a money game, like PBS Kids’ Mad Money. A money app for kids could be another great way for them to learn about money. Virtual Piggy Bank and Savings Spree are two you could start with.
As your children get older, you will need to come up with new ways to teach them about money, but it is definitely worth starting when they are young if you can. As of 2012, children were 10 years old on average when their parents first discussed money with them; this seems way too old. Teaching your kids about money at a young age will encourage them to be responsible with money later and help them avoid bad financial habits, as well.