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Kids and Money: Tips for Teaching Young Kids About Money
It's never really too early to teach your children about money. By the time they're in kindergarten, kids are learning math, learning about money, and have most likely had experience watching you handle money. Teaching kids about money and how money works is also an opportunity for kids to learn responsibility, financial planning and other valuable lessons. Hands-on learning experiences that engage children's minds, especially if there's an element of fun to them, helps most kids learn faster and retain what they've learned.
Here are some simple ideas for teaching your children not only about money, but also about the value of money.
Have your kids handle money
Start out by actually teaching your kids about money and letting them handle some, even if it's play money. If they have a basic handle on counting, you could buy a toy cash register complete with paper money and coins, or get creative and make your own. With this, you can play store - put price stickers on items, have your children 'shop' and then pay for it. Take turns so they're handling the money by paying for items as well as working the cash register and making change.
Play games like Monopoly and make your kids co-treasurers, then give them guidance and help with the larger counting. This gives them a feel for money, handling it, participating in transactions, etc.
For really young children, get a piggy bank or clear container where they can deposit money and see it building. Teach them concepts like 5 pennies amount to the same as a nickle, 5 nickels amount to the same as a quarter, 100 pennies equal a dollar, etc.
Give your kids an allowance
Start your child on an allowance. The amount is different for every family, depending on your income and budget. Some parents give the child the equivalent of their age - $5 for a 5-year-old, $6 for a 6-year old, etc. Sit down and go over your finances to decide how much you're willing to give your kids as an allowance and whether it will be a weekly, bi-weekly or monthly. Making children work in some way for the money is a good idea because it teaches them the value of money, and the value of working hard for money. For example, their allowance could be based on household chores (something like cleaning their room is worth so much money, cleaning the bathroom is worth so much, sweeping the floors is worth so much, etc) or grades in school.
Explain to your children that they're going to be getting an allowance, how much it will be, how often they will receive it, and what you expect of them, if anything. You might decide that you want them to save a certain percentage of it (for example, 10%), and give them ideas for things they could save for like clothes, a certain toy, souvenirs on your next family trip, etc. Teach them that hard work pays off. If they put in the work - whether it's getting good grades in school, helping out younger siblings, doing their chores, whatever it may be - they will see rewards.
Needs versus wants
Teach your kids about needs versus wants. Give them examples that they can understand - a need is clothes, a want is expensive designer jeans. A need is food, a want is unhealthy junk food. If they're old enough to understand, you could even give them examples of adult wants and needs and have them watch as you create your monthly budget, showing them that things like rent/mortgage, utilities and groceries are needs, while things like meals out, expensive shoes, and book club memberships are wants. You could even take them shopping with you to illustrate your point in a hands-on fashion. The younger you instill this in your children, the more likely they are to become frugal adolescents and adults who think before they buy and spend money responsibly.
Take your children shopping
Once your kids have learned about money, how to handle it and even how to make it through their allowance, take them shopping. Have them generate ideas beforehand of what they want. As parents and caregivers, it's our job to provide them with basic needs - food, shelter, clothing - but then there are the extras, the things they want but don't need. So even though you provide them with clothes, if they want something that's out of your price range - a pair of designer jeans for instance - they could save and pay for them themselves, or you could make an arrangement that if they pay half, you'll pay the other half.
That's part of why it's a good idea to have a plan before you go shopping. Are they buying a specific toy they've had their eye on that's a certain amount of money? Or perhaps they have X amount of money to spend and they want a new toy, book or game that's within that spending range. Give them guidance, especially if they're young and haven't shopped before, then let them pay for their items themselves. This will make them feel special, like a grown-up, and it teaches them about transactions with real money and people other than yourself or their playmates.
However you decide to teach your children about money, try to start as young as possible. Let them watch you do things such as pay monthly bills (writing checks, paying bills online, paying bills by phone), creating a monthly budget, and shopping. Remember that children learn by example, therefore you need to lead by example. If you're trying to instill frugality in your children and they see you spending money like there's no tomorrow, you're not setting a very good example. Let them see you making smart financial choices and saving money where possible and those lessons will stick with them and help them to become responsible adults.
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