March 11, 2021

Teaching Children the Value of Money

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Teaching children the value of money is one of the more important responsibilities a parent has. Beliefs, habits, and money management skills that children develop during their earliest years will stick with them throughout life. It’s important to reinforce concepts like saving and budgeting for kids at an early age so that bad habits will not take root. In this article, you will find tips on how to teach your child financial responsibility that you can use with kids of a variety of ages.

When to Teach Kids About Money

You can start teaching kids about money at a very young age. Most experts believe that you can start explaining money to a child during the preschool years. There are lots of fun, age appropriate money activities you can do with your elementary age children such as running a lemonade stand or a bake sale and you can progress to topics like finance for kids during high school and college. It’s never too early to teach kids about money and if you do it right, it can be very rewarding for everyone!

How to Teach your Child the Value of Money

You may wonder how to teach your child the value of a dollar. Teaching children about money is a gradual process that happens over a number of years. Don’t try to explain money to a child all at once. Learning money for kids needs to happen gradually and in age appropriate ways. 

Many parents wonder how to explain money to a child. Money lessons for kids often begin at the grocery store. Begin by explaining that every item at the store has a price and that the coins and bills in your wallet are used to pay for needed items. Compare prices of similar items that have different costs. Then compare items that are very different, but have a similar cost. When you pay at the cash register, explain that the money now belongs to the store and does not belong to the family any longer. 

One of the first kids and money activities parents often use to begin teaching kids about money is to start collection coins in a clear jar. Discuss the different sizes of the coins and their various symbols. Explain the different combinations of coins that add up to a dollar. This way to explain money to a child is good for kids who are old enough to understand simple addition and subtraction.

Where Does Money Come From?

A big part of explaining money to a child is helping them understand how money is obtained. Even very young children can understand that people work to earn the money to pay for things they need. The employees at the grocery store get paid to work there. The store uses the money it makes from sales to pay the workers and also to buy the merchandise and pay other expenses. Similarly, the family gets the money to buy things at the store from the work that Mom and Dad do.

Every Penny Counts in Money Management

An important part of explaining money to a child is that money is limited. Earning money takes time and effort and there is only a certain amount until the next pay day.  Money management for children does not have to be a complicated subject. Just explain in simple terms that your child can understand based on their age.

Money management for kids and adults alike means we have to make choices about what we will use our money for. This is a good opportunity to explain wants and needs. There are things we need, such as food, clothing, medicine, gasoline for the car or bus fare, etc.  And then there are things we want but don’t need, such as a larger TV, a fancy bicycle, or a new gaming system. 

Teaching kids to save money is another important part of money lessons for kids. From the age of 7 or so, children are old enough to open a junior bank account with a parent. Through this experience, children can learn what a bank is and how people use banks to keep their money safe and withdraw it from the ATM when they need it. 

When children are old enough to begin helping with chores, this may be a good time to introduce an allowance. Some parents choose to give their children an allowance because they got one as a child, or because it's helpful for teaching kids to save money. 

Others prefer to tie payment to work performed around the house and will use this as motivation to get the kids to do their chores. 

A third segment feels that performing chores goes along with being part of a family and that children should do their part regardless of whether or not they will get paid. This group may choose to give an allowance that is not contingent upon chores and then offer extra payment if a child performs work that is above and beyond routine duties. Whether you require your kids to work to earn their allowance or not, teaching kids to save money should be part of your kids and money lesson plan.

When teaching kids to save money, parents should explain to their children that there are many reasons why saving is important.  As we grow up, our expenses grow, too. Instead of spending money on items such as toys or treats, we need to pay for things like transportation, college tuition, medical care, and living expenses. 

Explain that in order to make large purchases, you need a large sum of money for a down payment on a home or car.  Explain that there are also costs associated with maintaining these items and that while these costs can be anticipated to some degree, there will always be some surprises.

Talk about how much of what you earn should be saved, how much should be spent on living expenses, and the concept of charitable giving, if you wish. This is also a good time to talk about the concept of budgeting with kids.

Activities to Teach Young Kids About Money

As discussed above, one of the best money activities for kids is to help them save their money in a clear jar. This will help them see what they have accumulated and if they choose to spend it, they will see that they have to dip into the jar and take out some of their precious savings.

Another good activity for small children is to play store at home.  Set up an area with some items and attach price stickers. Use pennies and make the prices very simple. Then have the child select some items and pay you for them. Then switch roles and have the child play cashier.

School age children can run a lemonade stand or bake sale.  Explain to them that they should track what they spend on supplies and then deduct that amount from their earnings. This is how they can see if their business is profitable and how much they earned.

Activities to Teach Teens About Money and Investing

Older teens or college age kids who have learned to save their money may find the idea of growing their nest egg to be quite appealing. Teaching kids finance when they are old enough to understand it, starting around age 12-14, can be a fun activity for everyone. 

Begin your finance for kids lessons explaining the concept of using the money you have saved to earn more money. Explain how investors buy shares of a company in hopes that they will grow in value, but that they could also lose value.  At first, you can “buy” a stock on paper and track it for a period of time to see the results. 

At some point, your kids will be ready to do some real investing, either with money of their own or money that you invest on their behalf to put towards their future expenses. Those interested in faith based investing may want to look into catholic mutual funds and other relatively low risk investments to grow their money in a way that aligns with their values.


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