Easing Kids into Money Management

by on June 4, 2013

Kids learn their behaviors by observing adults and learning lessons from their parents. As a parent, you should not rely on school or media to teach your kids about money management. School districts are focused on test areas like reading and science rather than a practical skill like handling finances. Media examples through television, the Internet and magazines are often demonstrations of excess that should not be held as ideals for children. You should exhibit good financial behavior and create lessons for kids that ease them into money management.

Your first lesson on money management should connect what your little ones learn in school to the financial world. Math lessons in elementary school often deal with simple addition, subtraction, multiplication and division. These lessons often relate numbers to real-world items like apples and oranges to turn abstract formulas into practical situations. You should approach money management lessons in the same way to ensure that your kids can relate to new lessons. A kid who gets to move coins and paper money in order to demonstration addition and subtraction will have an easier time with money management lessons later on.

Kids also need to learn how transactions and payments work in the real world using simple terms. You might need to brush up on these lessons to explain why we use paper money and coins to pay bills. A lesson on how checks work can demystify the strange experience of handing a signed piece of paper to another person. Depending on your child’s age, you can start to talk about credit and debt while stressing the importance of avoiding needless financial risk. You don’t need to have a graduate degree in economics to explain some of these basic principles to a kid.

An effective tool for teaching money management to kids is to use hands-on experiences from an early age. Your bank might offer a kid’s program that includes a piggy bank, wallet, and account book to encourage savings. You should discuss the need to save a little each week every time that your kid receives money. Kids who earn money mowing lawns, delivering papers or helping neighbors with household tasks are motivated to save when they see money build up in their piggy banks. These real-world experiences allow your kids to achieve balance between spending and saving their hard-earned money.

You can also ease kids into money management by showing examples of your family finances that can illustrate earlier lessons. A good lesson for older kids is maintaining a checkbook, which can be completed as you pay bills each month. You can talk about home mortgages, car payments and educational expenses in simple terms to explain why people need to earn money. These lessons do not need to focus on complicated investments or lending schemes but should set the foundation for sound financial decisions. A gradual evolution in a kid’s knowledge of money management can prevent costly mistakes that might impact your financial security down the road.

{ 9 comments… read them below or add one }

Arrear Overhaul June 7, 2013 at 11:46 pm

Really it is very important for everyone to thing about this aspect of life. We should not teach children directly about the Money Management things. There are lots of good ways by which he understood all such thing himself. For eg: when my children’s goes to school they study Profit & loss chapter etc.. and by that they learn money management concepts.

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BackFlip June 13, 2013 at 7:07 pm

Thank you for sharing this. We’re having trouble in this department. We can’t seem to get the kids to understand “Value”. For instance my teen bought a pair of jeans at a “discount” price of $180. (Yeah, we almost fainted. Neither my wife nor I own a pair of jeans that cost that much.) It took a couple of hours of explanation before we finally convinced her to return those jeans because $180 was still too expensive. Is anyone else struggling with this?

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liztrull June 16, 2013 at 3:55 pm

I love these tips. I have struggled with money management because the only examples I had growing up were not good ones. Being raised by a single mother there was just never enough money to go around. I do not want my son to face the same difficulties I have faces so I have been working to start teaching him the value of money and how to save now. He is just 5 years old but he loves saving change in his piggy bank and seeing how much it adds up to when we cash it in. The next step is to open his own savings account and start putting half of the money he gets into the bank and letting him save up for something special.
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Clear Water June 17, 2013 at 3:54 am

“You can ease kids into money management by showing examples of your family finances that can illustrate earlier lessons.” -I like this phrase! 😀
As time goes by and when they’re already adult, they will remember the lessons that they learned from their parents about money management.
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Leni June 28, 2013 at 6:38 pm

This is great advice. I really think most children aren’t taught about finances early enough in life, so when they grow up they don’t know how to properly manage their money. I don’t think it is a bad idea for schools to offer at least a small course on money management. I managed my mother’s checking account as a child so I got hands on experience with managing money at an early age. However, there are many people I know as adults who have never learned this lesson. Thanks for this post.

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Vasiliki Karakatsanidis July 9, 2013 at 10:09 am

Leni,
I agree with you that most children aren’t taught about finances early in their lives,so when they
grow up they don’t know how to manage their money.I have to admit that my son ,who is 14years
old, is pretty good on saving money.He watched me over the years how I was trying to find ways
to save and go after deals.These days we do it together,we use cash back reward cards and save money for our next shopping adventure! We are not only getting discounts but an addition 2%
cash back on every purchase we make,It’s worth it and he can’t wait to do his school shopping
in his favorite store!KIDS CAN DO WONDERS WHEN THEY LEARN!
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Joe July 12, 2013 at 11:44 pm

My mother’s teachings has helped me save over 30k usd by the time I reached 20 for an apartment. My classmates on the other hand didn’t save anything, I could afford a car and a apartment, while they were still living at their parents place, eating/sleeping, doing nothing productive with their lives. Wasting money on expensive lunches/junk food while having no income at all. Saving money should be in the basic teachings of school, otherwise the society will rot away.

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misslovely July 16, 2013 at 6:33 pm

This is a super important post! Kids nowadays are slowly being eased into money management, but I still don’t think it’s enough. Until the time that I hit high school and did CALM (Career and Life Management) courses, I had no clue how money worked! I was never taught how to buy a home, how much a week’s worth of groceries cost, how to calculate your gross monthly income and net income, and I’m still learning as I go. Parents need to teach their kids, even in super simple terms, how money/transactions work in the real world. They should teach their kids how much is a lot of money, and how much is not a lot of money (this comes in handy when you’re shopping with kids at stores with toys– they can learn which toys are too expensive and which ones they could beg for). Thanks for sharing!

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daycare inventory January 15, 2014 at 3:11 pm

I do agree with your nice post. Children will learn well from their early age. It is important for them to learn that money is not simply obtain by giving a hand and asking from parent but also from hard work. I teach my 3 years old kid to save money in piggy bank and set a purpose for it. Sometimes, she help me to clean the house or washing the dishes and clothes to get penny and save it on her piggy bank. She take the money to buy ice cream since she insist to use her own money instead of asking from me. Nowadays, she save every penny that she has for the dream to but bag and shoes when she enter kindergarten in the next 1 year and 3 more month. Believe it or not, children proud of getting money by their own.
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