"Money doesn't grow on trees," parents like to remind their children. But how often do they actually explain from whence money came?
If you've got children, now is as good a time as any to start teaching them about money. It's never too early to learn good spending habits.
Children tend to think of money as an adult concept, but even preschool age kids can learn about money. Start with the ever-popular piggy bank and go from there. Instead of fearing money, your children will learn it is something to value and respect.
These tips are from real parents who have had success teaching their kids the importance of saving money.
- Distinguish between wants and needs. Children (and many adults) have a hard time discerning between things they need and things they want. Have a young child make and decorate a wish box, using a shoe box. When young children start to beg for things that they see on TV or at the store, ask them to draw a picture or write the item on paper and put it in the box. When holidays, birthdays or other special occasions come around, your children can look in the box and think about what item they would really like. Hopefully, as children get older, the practice of the wish box will curb impulse buying and alleviate the confusion between needs and wants.
- Save your change. Have your entire family put loose change in a jar at the end of each day. Place the jar someplace where everyone can see it, but never remove any money from the jar. In a year’s time, this cash could potentially make a significant contribution to a family vacation. Identifying and counting the coins is a great math lesson for young children!
- Consider chores and an allowance. No matter what your budget, you can afford to give children a little money in exchange for their hard work. While daily tasks like making their beds, putting away their clothes and setting the table for dinner needn't be rewarded with money, giving cash for extra chores like folding laundry, cleaning up after a pet and cleaning a bathroom is a great way to teach kids about the value of hard work. Start with a quarter for little ones and work up from there. Do your best to be consistent and try to have an element of earning, saving and prioritizing. For specific examples of how families can structure chores and allowance see (link to allowance article).
- Raise a savvy shopper. Marketing, advertisements and pressure to have the latest and greatest are powerful. Help your child see through the hype and make sound choices with confidence. Check out this fun site that teaches younger children marketing tricks. Common Sense Media also has a wealth of information to help children of all ages learn about deceptive advertising.
- Take advantage of teachable moments. Compare the cost of a family dinner in the grocery store to meals in restaurants. Ask kids to do the math. When your child wants to purchase clothing or gadgets, help him/her comparison shop using store ads and the internet. Involve your child in your budget each month. Discuss with her that these are private family matters, but be honest about funds in and out for the month.
- Share your credit card statement. Parents can go through the process of reading credit card statements and paying the bill with older children and teens. Many schools have children/teens calculate the cost of not paying the full balance on credit cards. Take these opportunities to reinforce the cost of debt in real-world examples. If you have debt, don't be embarrassed. Let it be a lesson for your children.
- Manage paychecks. If your teen has a job, don't let him or her spend the money however they please. While teens have few bills, you can help them decide what to save and what to spend. You can also encourage (or require) your children to donate a small portion of their paycheck to a charity or religious organization. If your teen has direct deposit from an employer, funds can often be automatically directed to multiple accounts (checking and savings, for example). Teens can learn to balance a checkbook and use a debit card with parental supervision.
- Navigate the stock market. If financially possible, teens may find it very interesting to buy one or two stocks of companies that they know/use, track them, and see the ups and downs of the market. This should be used as a learning opportunity, not a way to make money. There are also virtual investing websites that parents and teens can explore together.
- Encourage gratitude. Children of all ages can acknowledge gifts and acts of kindness with a note or a phone call. This can be a good opportunity to help your child recognize and appreciate the value of both money and time.
- Track spending. When you feel your child is old enough, have her keep a diary of her spending for a week or two. Track all spending, even things that you pay for, such as lunch at school, for example. To elaborate, track your own spending and share it with your child.
Money needn't be mysterious and troubling to children. With these simple steps, you can teach your kids to respect money and live within their means.