How To Explain Finance To A 6 Yr Old
My daughter is six, but some of her questions are sixteen or worse sixty!
She is suddenly very interested in buying a big house, owning a fleet of cars, multiple bathrooms with each designed differently.
It seems she wants it all.
This generation does, and it wants it now.
Here is my attempt in helping all parents like me, explaining finance to their children.
Start When Maths Starts In School
As soon as she could count, I started showing her money and helping her count it. So she got real money and a full set of play money, with coins, notes of all denomination.
To make it fun, I also bought her a set of the same game in Pounds & Euro. Forex training!
She loved to count and she loved to give the money out. So if she had a small sum like 10-4=?, she would take out her coins and count them out.
Start Banking Early
We set up a piggy bank, but this one was different.
The game was designed to teach her all aspects of banking, not just making the piggy heavier!
She had to maintain a dairy (known as the account passbook in a bank) and note every Sunday what the balance in the bank was.
She was allowed to take out some money, but only if she wrote a note in her book that was signed off my her mother or me. (cheque!)
Let Them Pay
We get a lot of home deliveries and she is encouraged to count the money and give it to the delivery man.
She loves doing this when burgers are ordered. She orders on the phone, asks for the bill amount and will keep the exact change ready (+ tip!). She does not like to waste time once the burger is home.
This increases her confidence and her comfort level with money.
I also make her pay for a small item at the super market. So she will hold her item(s), stand in the queue by herself and pay for the item. In this she is not allowed to take exact change, but has to give a bigger denomination (100) and count the balance that is given by the check out counter assistant.
She loves the freedom!
No Pocket Money, but Expenses are discussed
She still does not have pocket money, but house hold expenses are discussed.
She is encouraged to see the cab fare, ask the price of groceries when shopping and in counter check the super market bill with the goods bought.
Sometimes she will tell me that we bought the tomatoes (she loves them!) expensive this week as compared to last week. She learns the concept of prices and that they vary.
Last but not the least, a lot of NO
she cannot ask nor buy anything she wants.
She understands that we have a budget and that we cannot cross it.
Some outings (to the mall) are budgeted for her to understand how much she can spend on say joy-rides or shoes and she has to make choices within that constraint.
It was funny in the start, but now she loves the knowledge that she has so much to spend and when it is over she is happy to leave the mall.
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