Kids and Money – What and When

One of the most valuable things that a parent can do is teach their children about money. If children are raised to understand how money works, they are likely to grow into financially aware adults who are able to make good financial decisions for themselves and their families. Of course, the big question is when to begin teaching them and what to teach them at each age and stage of their development.

The earliest form of financial education for children happens without you even necessarily realizing that you are doing it. Children are very observant, and they see and hear everything that you do. For example, if you go to a drive through ATM, your little back seat driver sees you stick your card in the machine, press buttons, and get money. It is useful to use simple terms to explain what you are doing so that your child can understand what is happening. The same goes for when you go through the check out line at the grocery store – even a two year old can learn to understand that all of the food in the grocery cart must be paid for and that mom or dad worked to get the money to pay for it. When they get a case of the “gimmies”, that’s prime time to explain how people can not always have everything they want, and that sometimes people have to make choices about what to spend their money on. Use yourself as an example, and let your kids know that there are things that you want that you can not buy, lest they think that that grown ups can buy whatever they want.

Once children are able to count money, an allowance can be a useful tool for teaching them how to save money and spend it wisely. The exact way that you set up your childrens’ allowances should depend upon your beliefs and values as a family. Some choose to keep it a separate matter from chores, and others tie the amount directly to chores. Some have rules about what amount must be saved versus spent, others let the children experiment with the money and experience the consequences of each of their decisions. It is entirely up to you, because you know your family best.

What are your favorite ways to teach your children about money?

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