Children are smart. Really smart. Sometimes it’s surprising when they spurt out a fact and you reluctantly have to admit to yourself you just got (accurately) corrected by a child. And for all the ways children are smart, the areas they don’t excel in are often simply due to their lack of experience. Almost nothing illustrates this as well as money.
Money can be a really stressful topic for many families, and you might feel inclined to shield your kids from money matters until they’re ‘old enough,’ but the truth is that kids start developing an understanding of money on their own by the age of three.
The earlier you start teaching your kids about money, the better financial habits and confidence they can enter their teen and adult years with. But how can you teach your kids about money? Keep reading for some amazing tips.
Give Your Child an Allowance
In pop culture, allowances are portrayed in many ways, from something commonplace among middle-class families to jokes about bougie families, but in reality, allowances are an incredibly valuable tool for teaching kids about money.
And let’s be clear that an allowance doesn’t need to be a lot of money at all—an allowance’s main purpose is to give a child autonomy and control over some money. This is essential for developing good money habits
A good idea is to have your child break their allowance into three sections: savings, spending money, and money that is dedicated to a charity. Allow your child to exercise quite a bit of control over their spending money. They’ll likely make a mistake, and maybe even be disappointed with the outcome. However, making mistakes with money is bound to happen, especially at younger ages, and it’s a critical learning experience—just be sure to help your child understand the outcome and how they can avoid it going forward.
As your child becomes more confident and grows in their understanding of money, encourage them to save their money for something they really want. Learning to delay gratification and assess their wants is an invaluable skill for many aspects of life, not just managing money.
Teach Your Kids About Wants and Needs
Teaching your kids about the differences between wants and needs is a crucial lesson on their road to financial literacy. You can demonstrate wants and needs by talking about how you might want something, but you aren’t going to get it because you don’t need it.
Another helpful way to illustrate the differences between wants and needs is to enlist the help of animals. My son Andrick and I have a dog named Ready, who I can use to demonstrate these differences. For example, Andrick knows that Ready needs food, water, love, and a roof to live under, just like we do. Squeaky toys and bones might be nice to have, but they’re not essential.
You can also ask your child to categorize items as you list them, based on whether they’re wants or needs.
Help Your Kids Understand Money by Visualizing It
Today, more than ever, money is really an amorphous thing. For children whose understanding of money is tied to physical bills, things like credit and debit cards aren’t meaningful. As your children are learning about money, it may be helpful to use physical money whenever possible.
This way, kids can see the money leaving your possession when you buy something, and if you put their savings in a jar, they can watch as it fills slowly over time.
Building a foundational understanding of money is helpful as your child gets older and begins to understand that when credit and debit cards, gift cards, and Paypal and Venmo are used, they represent money changing hands.
Talk With Your Kids About Your Family’s Money Values
So often, kids simply tag along at the grocery store or while on other errands, but they’re not cued into how you and your family make decisions based on costs. Explaining how you compare prices, look for deals, and consider whether a so-called deal is actually worth it can help your children gain financial know-how very early in life.
Additionally, kids don’t always have context for how much things cost or what expenses really are. Helping them understand and keeping them informed about your decisions will not only improve their financial wisdom, but can also make them feel more involved and respected.
Give Your Kids a Budget While Shopping
As your kids gain financial confidence and knowledge, start giving them more freedom and responsibility. Give them a budget for back to school shopping and see how they determine what supplies to get and why.
Not only does budgeting force kids to develop essential decision making and analysis skills, but it also gives them the opportunity to implement their knowledge of wants and needs in the real world.
Learning About Money From a Young Age is Priceless
Lots of kids grow up without very much insight into their family’s finances, experience with their own money, or countless other financial lessons like balancing their wants and needs, sticking to a budget, and saving.
Ironically, parents who ‘protect’ their children from the sometimes-confusing world of money actually do their kids a disservice; without having learned money management skills early on, they may end up learning the hard way in their teen or early adult years.
The good news is that it’s never too late to start learning about money, and it’s also never too early. Teaching your kids about money, how to budget, save, and make healthy spending decisions takes time, effort, and yes—even money. But learning financial skills early is a priceless gift that will give your kids confidence and last them their entire life.
Thanks for reading!
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