How to Teach Your Children about Money

How to Teach Your Children about Money

Teaching your kids about money can be tricky. Trying to show someone the value of a dollar when they’ve never agonized over earning one can be aggravating and difficult. However, the sooner they understand where money comes from, how to get it, and what it buys, the better off you both will be.

  • Teach Kids the Basics of Money when they Start Learning About Numbers.

    • If they can’t count money they won’t know what they have, so start there.
    • Give them a bank to save their money in and make it a big deal to do so.
  • Teach Kids the Basics of Saving Money and Spending Money.

    • Once they can count it, have them make two jars; one for saving and one for spending.

    • Every time he gets money, have him put half in each jar; this is a good habit to form.

    • When he wants to buy something small, make sure he knows the money to pay for it will come out of his spending jar and that once it’s gone he will have to wait for more money to refill it. Some kids think it’s a magic process, so do some adults!

  • Allowance.

    • Once your child is old enough to earn an allowance, you need to decide which path you want to take. Some parents don’t think that helping around the house merits a monetary reward and that everyone should pitch in to keep it a nice place to live. Others put price tags on things from taking out the trash to doing the dishes; this is your call.

    • Some parents only pay for chores that would normally be hired out to others anyways, like shoveling snow or cutting grass. In that case, why not pay your kids to do it than pay a stranger? I think this is a great idea.

    • Once you decide to pay a weekly salary to your kids, keep the savings habits rolling by having them place half in each jar; it will quickly add up.

  • Negotiating the Terms

    • Based on the time and effort, and of course the quality, of their work, your child may think they deserve more money. Use this as a learning tool, there will be a time when your child needs to ask for a raise and this is a good way to practice, teach, and learn!

  • Saving.

    • Short-term saving is easy. Let’s say your daughter wants a toy at the dollar store. She only needs to have a dollar plus tax. This is an easy short-term savings which will result in her getting what she wants in a short amount of time. This is great for young kids.

    • Long-term saving is tough. The older your child, the easier he will understand the concept. A little kid will count their money several times a day and wonder why they never have enough to buy the $70 video game they want.