Teaching Children About Money

The best ways of teaching children about money. Teach kids money management skills at a young age with these simple steps.

Teaching kids money management can be very rewarding. Long term it will help the child learn life-long skills that will serve to enrich his or her life. Short term teaching children about money will also help shift some responsibility from the parent to the child, easing the parent's load and helping the child feel more in control of his or her own life.

Step 1-Start a Savings Account

Letting kids have a savings account for college savings or other purposes will help teach them responsible personal finances.

When our children are very young we make sure they have their ownpiggy bank. We also open a bank account for each of our children before they can even walk.

We explain to them the advantages of saving and are quick to point out that they are earning money in their accounts through interest.

This is sometimes a difficult concept for children to grasp. Kids do not like to give someone their money when it seems like they are just giving it away, especially when they think about what they could get for that money.

Going through and talking about the bank statements that come to them in the mail has helped reinforce saving.

Step 2-Teach Kids Simple Money Skills

Teaching children about money by introducing simple money skills will help them grasp the concept of money at a young age. It is important for children to understand the basic values of coins and bills and to associate those values with what they can buy. Money worksheets might help with this.

For example, a ten cent dime is can buy ten times as much as a one cent penny. This can be a difficult concept to grasp at a young age, especially since the penny is larger.

Once the child is past the choking-hazard-age, consider allowing coins as play toys. My son loves playing with coins. I am not sure what imaginative thing is going on in that head of his and how coins can possibly play a role when playing with his army guys, but they do.

Step 3-Get a Piggy Bank

Humans in general and children especially need visual and hands-on aids to really understand money.

Having money in a savings account is great and it helps with children and money, but it really helps kids get excited about saving if they have a piggy bank to put the money in.

Kids can heft the bank and feel it get heavier as their savings increase. They can also know that there money is in there waiting for them. This is helpful in teaching kids about saving money.

Step 4-Start Giving Money Responsibility

Start your children out by giving them small amounts of money and allowing them to decide what to do with it.

As you enter a store, give your child a dollar and let them do what they want with it. Help explain the options. For example: spend all of it on candy, spend all of it on a small toy, only spend some of it and save the rest...etc.

Make sure that you help them understand the concept of sales tax and budgeting. Only allow them a set amount of money. If the item they are buying is more than the dollar you gave them, explain that they do not have enough money to buy that item and they will have to choose something else to stay on budget.

As your child gets older consider increasing their money responsibility by doing things like giving them their lunch money for the week. If they choose not to spend it on lunch, let them learn the natural consequence of going hungry.

Step 5-Help Kids Earn Money

It is important for children to realize that they are not always entitled to everything. Helping kids earn money will help with financial literacy for kids.

You may want to start out by asking your child to do a certain chore and agreeing to pay a set amount of money for that chore.

In teaching children about money, many parents like to give their children allowances. There are varying opinions and evidence showing that allowances are either good or bad. The decision is up to you.

I personally will not pay my children an allowance for doing normal household chores, but I will sometimes pay them for doing chores above and beyond their normal household duties.

I also justify not paying my an allowance, because I help my kids make money.

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