Teaching kids about money is an essential part of parental training. Though my parents didn’t give me in-depth financial lessons. I am very grateful for one thing which they taught me, a good saving culture.
Today when I see how I effectively handle finances compared to some of my friends, I am always thankful to my mom for teaching me that.
Whether we shy away from the fact or not, our kids will at one point have to handle money in life. It is what you teach them now that will guide them on how to use it.
If you do not teach your kids how to save or conserve things, they will end up wasteful. If they do not understand the concepts of trade, investment, gain, or interest, they may end up living with limited income in their lifetime because they didn’t utilize finances effectively.
Teaching kids about money should start from an early age. You do not have to wait till your kids are teenagers till you give them money lessons. There are so many fun and effective ways to go about it. Here are 10 .
1. Start With Basic Counting
When teaching your child about money, it is very important to start from an early age, like age 1 and 1/2 years to two years. Teaching preschoolers about money first involves you teaching them about basic counting.
Give them coins and demonstrate by counting “one coin, two coins, three coins” on and on like that. Then, stack the coins according to their different denominations.
You will have to do this repeatedly for them to grasp what you are trying to say. Do not let counting be restricted to coins alone, you can count other things like sweets, fruits, their shoe clothes, etc.
Since money is basically about figures, they will need to understand the basic idea of counting, they will be able to release its importance to finances. Note that you should not leave coins with small kids alone as they can swallow it.
2. Make Them Have An Understanding Of What Money Is
Kids often hear the word money but hardly understand that we have to work hard to get it, that it has value and what happens when it is spent wrongly. They’re used to getting what they want so in their understanding, it will always be there.
I read of a conversation between a man and his son. The son asked for something at the shop. When the father told him he didn’t have the money for it, the son’s reply was, “just go to the bank, and they would give you the money”.
How hilarious, but that’s the thinking of kids. They think there is an infinite supply of money In the bank or somewhere.
It is your job as a parent to let your kids know that money isn’t not always easy to get, that sometimes you have to work hard before you earn it, and you have to make smart choices to sustain the one you have, so you can get more.
Explain to your kids that each paper of the different denominations has a different worth. Teach your kids the names of the different denominations you use like dollars, cents, penny, and use them in your daily conversations.
Let them know that money is not just paper that each denomination carries different values and worth. Explain the concept of debt, loans, savings, investment plans, etc. You do not have to teach your kids all of these at once.
Find strategic times to fix in these important lessons in your everyday discussion with your kids.
Note that you have to make your child also understand that he shouldn’t go about asking people how much they earn or the worth of the things they own, as it is quite impolite.
3. Introduce To Them The Idea Of Trade
Teaching kids about money also requires you to teach them in simple ways; the concept of trading it will help them grasp the importance of money.
In fact, it is one way on how to teach your kids the value of money and make your child business-oriented. You may ask, “How can I teach my toddler about trade when he still trying to grasp basic things like wearing his clothes and cleaning his teeth.
Well, here is how you can go about it. If you are eating some cookies and your toddler asks for some, tell him to get the cookie jar so you can give him some (this way, he is working to get the cookie).
Or, if you both are drinking juices, maybe yours is an apple juice, and his is an orange juice, if he wants to have some of yours, tell him to swap. He can you can only get some of yours when he gives you some of his.
This will make your child start getting an understanding of trading, which is giving something to get something in return and working to earn something.
4. Play Money Game
A cool and fun way to explain money to your child is through money games like counting, playing fake store, life, monopoly, etc. For young preschoolers, you can teach them the basic counting of numbers and identification using coins.
Also, teach them the value of each coin and arrange them based on the colors, sizes and worth. For older children, you can teach them about money by setting up fake shops in your living room, their rooms, or in the dining.
Display items like sweets, cookies, candies, shoes, clothes, etc., and put a price tag on each of them. Then they can learn about bargaining, making the right choices when shopping, budgeting, etc.
It is important to make the kids learn not to fix unreasonable prices on items. For example, if they fix the price of two pieces of candies as $50, we all know it is unreasonable to make them know that things have different worth and that is why prices varies.
This way, you provide a great learning opportunity for them. Other money games they can learn from are: monopoly Junior, life, money match me, buying it right, etc.
5. Teach Your Child About Shopping
A lot is involved when shopping, from differentiating between the need and the wants, finding the right stuff to buy, getting good purchases, bargaining, etc.
A child needs to learn all these because it is part of financial literacy. When your child is a bit big, from about 2 years to 3 years and above, you can start taking him on shopping trips not just to get things for him, but to make him learn how to shop.
Before you go shopping, a fun way to make your child involved Is to work with your child when writing a list. Ask your child, “what are those essential things we need in the home”? And you both should write them down.
Of course, he may mention some outrageous things like lots of candies Or toys, or clothes even when we have enough at home. Utilize this opportunity to explain to the child the difference between a want and a need.
Tell him that wants are extras like the sweets, more clothes, more toys that he mentioned earlier, but they are not always necessary. But needs are the essential things we can’t do without, like food, soap, drugs, etc.
And during shopping, it is good to strike a balance between the wants and the needs, which is why it is important to write a list. Also, tell the child that it is always important to shop It is important to shop with a budget.
You can explain that budgeting is setting out a specific amount of money for shopping and that whatever you buy should be within the budget. At the end of the day, you and the child should plan a list within your budget.
Then, take the child to the shop. At the shop, you both should discuss each item you purchase. Do not just pick items; make him see reasons why you are picking a specific item.
For example, you may have to go for a brand of tomato paste that has greater value compared to a brand that is popular.
If your kids are big enough, give them some money and allow them to make purchases in one section of the store while you continue shopping in another section.
When you both are done, you will then know how well he has learnt from all you have taught him. Do not forget to praise his effort and make appropriate corrections where necessary.
When paying the bills, you can give the child the money to pay and see if he can give you the correct change. This way, we experience firsthand about how money is used and how to shop.
I should also add that you should make your kids part of some important financial decisions in the home if you really want to go about teaching kids about money.
For example, if you want to change cars or buy a new house, you can tell your kids about the plan; tell them to research about it and get back to you, and you all would compare and make the best decision. It is a great way to teach your kids about money.
6. Teach Your Kids To Save And Invest
Teaching kids about money also involves you making your child know the value of saving and investing. To teach your child how to save, you first need to let your child learn how to delay gratification and how to curb impulsive buying.
For example, when your child asks for something irrelevant, like another toy car when he already has several, tell him it is unimportant.
Or, if your child asks for sneakers, tell him to save up for it or to wait till the one he has is tight before you get another. To curb impulsive buying and to encourage saving, you can also introduce to your kids the idea of a wish list.
In a wish list, your kids can write anything they want for a period of time say, 1 month, 2 months, 3 months, depending on how you have planned it.
Then, you both sit down and analyze the list arranging the items in their order of importance before he gets anything from the list.
When the kids are of age say 3 years to 4 years make them start saving money. You can buy a piggy bank. It is a very useful gift you can give to your child on special occasions (you can check out more useful gifts on the post 50 important gifts for kids.
Make the child save those monetary gifts he gets from friends, parents, his school, or from Grandpa or grandma in the piggy bank. Then he can use some of the money to buy those things that you have approved from his wish list.
For your older kids, teach them to start earning money so that they can save money. You can pay them for carrying out some house chores like preparing dinner, clearing the yard, doing laundry, etc.
This way, they can have something to save up. I think it is wise to divide your child-saving receptacles to three. One for his personal savings, one for his personal expenses, and the last for other things like gifts for people or donations.
Tell him that half of every earnings, monetary gift he gets or allowances should be put in the personal saving, and the rest can be divided between the money for personal items and for donations.
You should also set a saving goal for your child, though be flexible with this. Do not set outrageous goals.
Remember he is still a child and still learning. Setting a saving goal while your child saves is important or else he will not be able to take saving all that serious.
Also, attach a reward to the goal. For example, you can say by the end of the month your savings should be around 20 to 50 dollars.
And if it gets to that amount, I will add some money to buy for the Xbox you have been asking for. I believe the child would want to work hard to meet the saving range.
To encourage your child to save, you can provide small allowances every month so that he can save up for those things he needs.
7. Set The Example
If you are going to be teaching kids about money, you need to first learn about money yourself. If you have poor spending habits, you do not work with a budget,
No investment plans, or have the habit of buying things on impulse; you will not teach your child anything about utilizing money effectively.
So, show the right example because kids learn so well by example, which is why it is important to involve them in some financial decisions.
Take them shopping, let them see how you bargain prizes, sample different products, and ask them which they feel is better. They may not give the best answer, but you get a chance to teach them why you are going for an item over another.
Pretend like you did not know the change the cashier should give you and ask them what they think should be the change. Always shop with a list and budget, especially when you are shopping with your kids.
Teach them not to waste things but instead to conserve and preserve what they have and you show it yourself by you not being wasteful.
You and your partner should be open about your finances especially to each other and you should work hand-in-hand teaching kids about money,
for it will be contracting and confusing if you go to not share the same financial goal, and it will pass the wrong message to your kids.
Why you teach kids about money, be careful not to overemphasize material things like houses, cars properties so that they do not develop a mindset that those things are what matters over all the important things like spending time with people, showing love, giving, etc.
8. Invest Their Savings
On the post on how to financially secure your child’s future, we outlined 10 ways to go about it. Investing the money in a savings account was one and it is also one way to teach your child about money.
Once your child has grown to teenage age, you both can take a walk to the bank where he gets some financial lessons from the professionals, and he will learn that overtime interests can be accrued in his savings account.
You can then open a savings account with a high-interest rate for your child and encourage him to start putting some of his savings into the account.
If you both contribute regularly into the account, there will be something big saved up before college. Also, encourage your teenage kids to look for jobs around during the holiday or other online jobs. They can save about 40% of their earnings.
9. Introduce Your Child To Different Money-Saving Strategies
Think of this as a way to save more and earn more while teaching kids about money. Like I only mentioned earlier, teach your kids the art of bargaining, sampling products, sampling stores.
Engage them in yard sales where they can sell off their old toys, shoes, clothes, books, etc. and get some money in their savings. You may also want to read this post 16 skills to teach your kids before they leave home.
When your kid has skills, they have better chances to be productive and earn money because they offer value.
So, teach them to cook, bake, type, driving, going shopping planning and organizing communication skills, social skills, etc. All these skills are useful in the outside world.
10. Curb TV Influence
You may try your best to do a good job teaching kids about money but sadly these days we are bombarded with advertisements and commercials that promote and entice people to buy, buy and buy.
Your kids will be exposed to these too. Ensure that you tell them that the numerous Commercials they see on TV, the internet, and other media do not always promote good saving habits, that the advertisers and marketers will always be there to lure people into buying things but they shouldn’t fall for it.
Remember them that they should be wise spenders and always know the difference between wants and needs. This way, you counter the influence of the media and make your child financially balanced.
Aside from all these money lessons, other money lessons you should give your kids are: generosity, learning to share and most importantly that lesson that money is good but isn’t the only basis of life so they have a balanced mind-set financially.
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