You want your child to be smart and excel at everything they do. However, when it comes to money, parents rarely introduce their children to the principles of finance at a young age. But doing so can prepare them for life. Parents have the greatest influence on their children’s financial management behavior.
Teaching children the fundamentals of finance is not very difficult. Let them understand how to make simple transactions or make monthly savings. They should understand that nothing is free and making money is not easy.
This post will help parents teach enduring financial principles to their children conveniently. We compile some tips on how to teach kids about money.
When Should You Teach A Child About Money?
Although it’s never too late to teach your kids about money, the sooner you start, the better. Young children can more easily master various aspects of money. Experts recommend that parents start talking about money when their children are in the second or third grade (1). They believe that this is the age when children start to learn different mathematical concepts, and they can understand monetary transactions better. However, even younger children can understand the basics of transactions, and you can use it to talk about the cost of a product, such as a toy.
20 Ways To Teach Kids About Money
1. Use a clear container to store their savings
While the traditional piggy banks are fun and the recently available “house and dog” type of banks are cool, they do not usually let the child see the money. Children, especially the younger ones, have no understanding of where their savings have gone once they have dropped the money inside the piggy bank.
Use containers made of transparent plastic so that children can see through when they drop coins or paper money.
2. Play games involving money
Games like Monopoly and Life are great ways to teach children about money. Get your family together one day after dinner and let your child become an entrepreneur.
3. Give an allowance
The best way to teach children about money is to give them some money for themselves. Children who manage money since early childhood are likely to develop good financial management habits as they grow older. These children have a better understanding of the concepts of saving money and spending wisely.
You can give your children a fixed amount each week, or you can “pay” them to do housework.
4. Take them shopping
Every household has its share of monthly expenses. You can take your children to the supermarket to buy groceries, or go to the farmer’s market to pick some fresh vegetables and fruits. Tell your child how much money you have on hand. That will be your budget. You can also ask them to figure out what they can buy with that amount.
Children can also take the lead in finding products for sale to save more money. Let your child carry a calculator to calculate and track the money spent and the amount saved.
5. Encourage your child to save
You have provided your child with a piggy bank or a container to store their savings. However, unless there is a goal, saving money is not attractive to children. Set a small goal every month and reward them with bonus money to encourage them to save.
Make sure to talk to your children at each step and let them decide how to use the money received. If you have more than one child, you can also set a friendly competition between them.
6. Help them avoid impulse purchases
Every child has a weakness for toys. They might be saving up for an action figure, but the moment they see the race car at a toy store, they decide to spend their savings on it. This behavior is quite common in adults, as well. Curbing this behavior is difficult; many times, saying no to a toy at a store might result in an epic meltdown. But be patient and keep your dialogue active.
Talk with them about how an impulse purchase will make them dip into their stash for something they already have or do not really want. In turn, it will delay them from achieving their goal of buying what they need.
7. Take your children to the bank
Collect the money saved by your children, and then take them to the bank to deposit the money. Open an account and deposit the money in their name. This is the ideal way to teach children complex financial transactions. You can also explain to them that in the savings account, their money will increase, not in the piggy bank. Having a bank account can also provide your child with a passbook, reminding them physically and visually how much money they have.
8. Play “Let’s go shopping”
Arrange items you find at home just like in a supermarket and assign prices to them. Give your child a certain amount. Ask them to buy as many items as possible within their budget. This is a good exercise for your child to understand how much budget is required when shopping.
9. Talk to your child about charity
Savings are as important as giving. Teach your children kindness by talking about helping people who are less fortunate than us. Make a charity or donation jar where your child can put a certain amount for charity activities every month. They can decide which charity they want to donate to. This is a great way to make your child humble, compassionate, and grateful.
10. Cut your children’s TV time
There are TV commercials that are designed to attract the attention of the kids. Parents find it difficult to resist the influence of these advertisements. Imagine what effect they might have on the child. Children will see health drink commercials that make them “stronger” or a toothpaste that comes with toys. They are naturally attracted to the advertisements and want to own them. Reducing TV time can ensure that they don’t see too many advertisements and, therefore, don’t want to buy things they don’t need.
11. Explain credit cards and ATM
Although children may find it difficult to understand how credit cards work, you can tell them that paying with a credit card requires you to pay more money (through interest) to the bank. Preschoolers and younger children will understand better when you use an ATM card to withdraw money. But they will not know where the money comes from. Begin to discuss how credit card companies charge interest on every payment and how ATM cards work. This is an easy way to teach your children how to treat their money carefully and establish good credit habits when they grow up.
12. Help your children to budget their money
Your child may save pocket money for toys or games. But they also have other responsibilities. If there is a close friend’s birthday, they may be confused about how much to spend on buying a gift. Without supervision, they can waste all their savings on one purchase. Sit down with your children and plan how much they can spend. This will help them make prudent financial decisions. You could also introduce them to e-commerce sites to know the difference between retail and online prices of items.
13. Tell your children to guess the price
This is a game similar to “The Price Is Right.” Write down a list of products or services you use at your home and let your children guess how much they cost. You can write things like:
- Movie tickets
- A bottle of jam
- Mobile bills
- Rent
- Car
This is a game that gives your children the perspective of every product or service in terms of its value.
14. Compare products
This teaching technique about money is effective for middle-graders. Children will know about monetary transactions and currency value. They can also better grasp the mathematical aspects of a transaction. If your children save money for item A, but they get distracted by item B, you can tell them that if they buy B, there will not have enough money left to buy A. They will be able to weigh these choices and understand the outcomes.
15. Play money games online
Children can play many online games to learn about the various uses of money. According to their level of understanding and age, pick games that can help teach money management to children.
16. Make your children watch money videos
You may not believe it, but there are money videos for children on YouTube. These videos discuss the importance of money and its various uses. The best part of these videos is that they are short and interactive enough to attract your child’s attention. If your children get screen time, put one of these videos on the playlist.
17. Go to yard sales
Yard sales are a great way to get what you have always wanted to buy. This is also a good time to teach your children about how money works. Show them the benefits of buying second-hand quality products to save money. You can even ask them to bargain and buy products at a better price.
18. Plan a vacation
Planning a vacation is one of the most time and money-intensive processes for a family. You can use this opportunity to teach your children about money. Ask them to inquire about all the aspects of travel, such as car, bus, flight, and motel. Ask them to check the various travel planning sites and make plans based on budget. Show them the difference between air travel and other modes of travel. Even if you travel by air, there are different rates at different times. You can create a holiday planning spreadsheet to enter your thoughts and review them.
19. Make a wish list
Many parents have rules for buying toys or games for their children. They buy on Christmas and birthdays. You can make similar rules. Ask your children to list what they want, and then sort them according to what they need the most. This will teach your children to prioritize their needs and develop a budget to accommodate these requirements.
20. Lead by example
Children always observe what you are doing. If you tend to splurge and pile things that you do not need, children may eventually do the same. If you focus on things you need and buy them from places where you can save money, your kids will do the same. You are responsible for setting a good example for your children.
Good financial values begin very early, and in many cases, they consolidate as they grow. As a parent, the issue of money is one of the best topics to introduce to your child. Teaching children about financial principles can have a huge impact on their future. It is always better that your kids make mistakes as children and teenagers than when they are adults with higher expenses.
