Money is a vital component of our everyday lives. Teaching your kids the value of money early will go a long way toward laying the foundation of responsible financial management for the rest of their lives. So how do you start down this path of fiscal education? It’s actually much simpler than you might think and if you get them interested when they are still young, you can make the lessons fun and engaging.
But how early is too early? Once your child is able to count and understands the basics of math, you can begin to apply some of those fundamentals to the principles of money and spending.
Making a Game Out of It
Giving your child some play money is a good way to start. Pretending to make purchases will help them to grasp the purpose of money and how it’s supposed to be used. This can give them an idea of how the denominations work, making change, and teaching them how coins and paper bills relate to one another. There are a number of apps out there that can also provide your child with fun situations and challenges that will guide them through the important facets of money and how it works.
Board games like Monopoly are also a great way to introduce your child to counting money and learning how to spend it and when to save it. Buying and selling property, paying rent, and earning and losing money based upon a variety of conditions in the game can teach the value of money and prepare children for real world situations they are likely to encounter at some point in life.
Giving an Allowance
Many of us had one growing up but some of you may be reluctant to give one to your own kids. Should you decide to do so, your child is ready to have one at about the same time they begin school. But make sure you use this an opportunity to help them understand how their money is supposed to be used and how to do things with it like make change. It’s one thing to do it with play money, another to do with real dollars and cents.
Lunch money for school or bus fare can be included as part of their allowance, just be sure you give them more than what is needed just for purchasing these things. It allows them to spend their money on the things they would like to have and it gives them the ability to make decisions on whether to save their money or spend it. You can permit them to make a mistake every so often, they need to learn how to budget effectively and when a child has money in his or her pocket, only then can they budget. Handing them exact change for the things they need to buy isn’t much of an allowance and it doesn’t imbue them with the skills for managing their funds properly.
Some parents may not be comfortable with the idea of giving “free money” to their kids on a weekly basis. There is certainly validity to this argument and while giving a child an allowance can provide the stepping-stones toward effective money management, it can also help them learn the value of a dollar through hard work. Earning an allowance offers kids the opportunity to understand that money is not merely given but comes from work. So giving your child some chores to complete, be it cleaning their room, taking out the trash, mowing the lawn, and as they get older, adopting an entrepreneurial spirit to offer such services to other people in the neighborhood, will give them an even greater understanding of the value of money. That feeling of buying something from money they earned themselves instead of having it given to them can be a watershed moment in their youth.
Once they are earning an allowance, they can have the freedom to put their money towards the things they want and need and learn how to allocate the amount they need for each. This will be instrumental in introducing them to concepts like price comparison and shopping around in addition to teaching them the value of buying items of quality. The first time something breaks that they purchased with the money they worked hard to earn will be a valuable opportunity towards helping them understand how to select the things they want to buy instead of just paying the lowest price.
The Value of Saving
Spending is only one part of the financial equation but teaching your child the importance of saving is an essential aspect of money management. But this part may be a bit tougher to get them to wrap their heads around at first. Showing them that they can use money to get things they want and need is the easy part, helping them to comprehend the idea that putting some away for later is going to require some creative thinking.
The Piggy Bank
While many of us got an allowance when we were kids, chances are we all had a piggy bank. That can be a fun and creative way to introduce your child to the principles of saving. You can turn it into a game where they have to save a certain denomination of coin, such as a quarter, and whoever gets 20 of them first wins. Then explain to them how 20 quarters equals five dollars and walk them through how saving a small amount here and there over time can turn into a bigger amount later on.
As they learn how to save, they can begin to make decisions about putting money aside and when to do it. If your child has a ten dollar bill and spends nine, he or she is left with one dollar. Your child can then decide to put that dollar away, especially if he or she is saving to buy something expensive, or spend it on something that might be less important than that particular item. Only your child will be able to make that distinction and it can help them learn about saving.