6 Ways To Teach Kids About Money

by on September 24, 2012

Here are some useful tips that you can use to help teach your kids about money.  The key is to get started early and to relate finances to every day life.  Here is our list…

1. Introduce them to the concept of money as soon as they can count. Children who grasp the concept of money can soon thereafter learn about interest. Consider including loans from you to your preteen and vice versa so that the idea of compound interest being a friend to investors and an enemy to borrowers really sinks in.

2. Teach by example. Children learn by observing and imitating. When you use an ATM, write a check or visit the bank for other business, explain what you are doing. When you make a purchase that’s not routine, explain why you chose that item and why it is worth the cost. Children will absorb your attitudes and values by implication in addition to gaining familiarity with basic financial concepts and actions.

3. Use grocery shopping as a classroom for financial education, since nearly a third of the average household’s take-home pay is spent there. It is where you can demonstrate the value of comparing prices per unit, using coupons and shopping for sales and produce that is in season. To make the lesson really stick, take the amount you saved using sales and coupons and put it in a jar. When it gets full, have your child take a small portion for a reward and put the rest in the bank.

how to teach kids about money4. Let them make decisions, good and bad. Children and young adults need to see and understand the consequences of each decision they make, and they won’t learn if you step in and stop them from blowing all their cash on candy or toys. Better to learn from spending a week’s allowance on candy as children than to learn from maxing out a credit card in college.

5. Teach them the difference between “wants” and “needs.” Introduce the subtleties of the difference as children mature. For example, when shopping for school items, you admit that your child needs new clothes, but does he or she need a triple-digit clothes budget? For older children and preteens, you can set a price limit for a needed item; they should understand that as a parent you will pay for what they “need,” but they must use money from birthdays or chores to buy “wants.”

6. Critical examination of advertising on television, radio, print and all around you is a consumer skill adults practice without thinking about it. Practicing it with your children can help them learn to think critically about the media they absorb and how it affects their spending habits. Ask thought-provoking questions such as…

  • What message does the ad give you?
  • Are the product’s claims realistic?
  • Are there less expensive but equally useful alternatives?
  • Is the sale price really a good deal?
  • What other items could you buy if you didn’t buy this?

It’s never too early to teach a child about money if you fit the lessons to the appropriate age group. Incorporate teaching moments into everyday situations will teach your child fiscal responsibility without making it a chore for both of you.

Have any comments or advice of your own to share?

{ 15 comments… read them below or add one }

melanie September 26, 2012 at 3:15 am

Growing up, I could tell my parents didn’t have much. Which was why I was always wondering why they wouldn’t let me get some things that my friend’s had. It made me feel left out that I didn’t have what they had. If I wanted something I had to do chores. I would get paid but then I always used it to buy food for me and my siblings. I’m glad I’m the oldest and that my parents taught me the importance of money. I’m not spoiled and I don’t ask them for anything. Great article, it really made me think about the first time I started learning about money.

Melanie

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Kristine September 26, 2012 at 12:55 pm

Thanks for the very informative share, I have a 3 year old daughter and teaching her the concept of money at this age is quite difficult although I have successfully introduced a reward system wherein she gets to pick a treat for doing a job in school or for packing away her toys. I will surely take note of the tips you shared so I can enforce them when she’s a little older 🙂
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KennyK September 26, 2012 at 5:14 pm

Two thumbs up, this is a very informative article. My parents used several of the techniques mentioned, and I’m very grateful for that. At quite a young age, I learned what money was and was responsible for keeping coupons, paying for a bread at the bakery, helping with change, giving the right coins, and so on. My parents always told me to be careful and pay attention, and gave me more and more responsibility as I grew older.

It’s important to start early enough and also teach kids that they can’t always get what they want, that they need to make choices, save and be wise with their decisions.

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Joy September 27, 2012 at 3:37 am

Great tips, I personally think that teaching our children about money is also a good way to make them realize the value of the things they own, this is an excellent way to encourage them to take care of what they have. Thanks!

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Felicia Gopaul September 28, 2012 at 10:28 am

The earlier we teach our kids how to value money the more they become responsible in their spending when they grow up. This is a very relevant post and excellent tips on how to start educating our kids about money matters.
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Emma Simpson September 28, 2012 at 10:44 am

I do think that financial education should start young and it is vital to instil a culture of financial responsibility with our children. So many adults seem unable to grasp a basic knowledge of finance and often bury their heads in the sand rather than tackle and resolve financial problems.

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Lee September 30, 2012 at 5:33 am

Teaching a child the difference between wants and needs is essential for them being able to budget later on. Knowing when not to buy something so they still have money left for the essentials like bills and food. Sounds easy but certainly not an easy thing to achieve when advertisers are telling them that they basically need everything just to survive.

Great post thanks lee
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Carley Verlingk October 1, 2012 at 11:24 am

Thank you for sharing this information. I think it is extremely important that you teach your children about money and how to spend it. They should definitely know what they need to buy and what is a luxury, especially for they are at university and have to be more independant.

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Rochell Husselbeev October 4, 2012 at 5:22 pm

Thank you for sharing this post. I agree with all the points made, and I definitely think that you should make sure you show them how to spend. They will watch your every move and imitate your actions, so make sure you set a good example.

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Cmarten October 5, 2012 at 10:38 am

Wonderful tips. I remember the moment my son finally understood that the ATM didn’t just spit out free money, but that it was my money I gave to the bank for safe-keeping. He’s fourteen now and busy making and saving his own money. We talk a lot about advertising like you mention at the end of your post, and how to determine worth of an item based on its quality and usefulness, rather than what the ads say.

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Suzan Vanegas October 7, 2012 at 10:20 am

Hello, it is always hard to teach children these values as I think it can get very difficult for them to understand to understand the consequences if something does go wrong. The best way to teach them is to simply set an example and be a good role model as they will gradually pick up on this and will learn what to do and what not to do.

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Lijah October 9, 2012 at 10:25 am

Your point about making kids see the difference between wants and needs really struck a cord with me. I was trying to explain this concept to my 3 year old niece.

Apparently for Christmas she thinks I’m buying her the entire children’s section of the Argos catalogue. I think not lol. Still, it was fun trying to explain why it just wasn’t going to happen.
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Elizebeth Kapoorg October 9, 2012 at 1:33 pm

Thank you for sharing this post. I think it is really important to teach your kids about money and the value of it. You should let them learn by themselves and learn from their mistakes, however also teach them the rights and wrongs.

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Bizzy Mania October 16, 2012 at 8:36 am

One thing I’d like to add is think more about what you can sell, NOT what you can buy. It’s a good mindset shift to start off I’d say!

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Ed Hoffmann December 28, 2012 at 9:04 pm

Number 2 and 4 are huge for me – kids learn by your example, especially when you think that they aren’t looking. There are many times when when I swear my boys aren’t looking, yet the next day I hear them repeating what I said verbatim to their friends! And letting them fail – I say let them fail early and small, rather than late and big. It’s a lot easier to be a successful kid than a successful adult…
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