Helping kids understand money is such a valuable exercise. Growing up realising money’s value and its limitations can give them confidence in saving and spending as they get older, potentially helping them avoid costly mistakes that can lead them into debt that takes years to pay off.
Parents have a distinct advantage over schools. Where schools can teach basic arithmetic, the fundamentals of how our money system works and even maybe introduce children to currency, parents can give children real world experiences.
School work can sometimes feel a little abstract to children, so they struggle to see how lessons apply to real life, but as parents, we can change that, especially around money.
As an added bonus, teaching children about money can lead to an interest in professional finances and accounting.
Kids are never too young to start learning about money. The parents you see holding toddlers up to pay for their ice creams, for instance, have the right idea. No explanations are needed. Even very young children soon get the idea that to get what they want they must hand over something in return.
You can take this a step further with children of any age. When you’re grocery shopping, take cash sometimes instead of paying by card. Our cashless society often makes it even harder for kids to grasp the concept of money if all they see is a piece of plastic tapping a gadget. Having cash in hand, let your child hold it and pay the cashier then receive any change.
Something else young children struggle with is understanding that more coins don’t automatically mean more money. Given the choice, kids will often choose five pennies over one ten pence coin.
Similarly with paper money, a handful of coins can feel more valuable than one piece of paper. They need help understanding this concept, so giving them the chance to receive change in a transaction provides a practical demonstration.
Games for younger children can help too. There are some online money games here.
Try Reasoning Aloud
When we’re shopping, making decisions about brand, cost or quantity and weight goes on silently in our thoughts. Speaking the thought process aloud in front of kids can show them why you make certain decisions without it turning into a lecture. You don’t have to make a big deal of it in public, just ask yourself a few questions and answer them when you know the kids will hear. It might go something like this:
“Hmm, which cereal shall we buy? This one’s cheaper but that box is bigger. We’ll have the big box, I think, it’ll last longer.”
With older children, try including them in family decisions about spending, especially if the decision impacts them. Discussions about holidays, house decorating (especially their bedrooms) or major expenses like buying a car or even a new washing machine. The idea is to make them privy to how you make decisions about spending money.
Money talk with children should never be stern or judgemental. Try and approach it with no more stress than you’d show when offering choices for lunch. When talking about money is as common an occurrence as eating a meal, it becomes ordinary and commonplace, without mystery or fear.
Letting children manage their own money and helping them reach smart decisions about what to do with it, is part of the learning process.
You can start very early with a piggy bank, giving toddlers regular small amounts to post into the box. As they grow, give them a chance to increase their allowance or pocket money by doing chores round the house.
You could have a tally system pinned to the fridge, listing jobs to be done and their monetary value. When a task is complete, tick it off, then add up the amount earned at the end of the week and add this to the basic pocket money you give them.
Consider a Savings Account
Consider a savings account at the bank. Some young children will struggle to put money in the bank when they’re not buying anything. It feels like giving money away. Real experience is needed to show them it’s just tucked away safely rather than gone forever.
Give them Control of their Spending
As teens grow up, you could try trusting them to take care of certain regular purchases they need, such as on hobbies or social activities, even clothes or toiletries.
Let your child choose which area of spending they’ll take care of, then work out how much you spend on those items over a year. Divide the amount by twelve to get a monthly figure, then increase their allowance by this much.
You may need to remind them that they must remember to buy those things, and if they spend the money elsewhere, they must go without. It can be a tough lesson, but a valuable one.
When children grow up understanding how money works in everyday situations, they have no fear of it and can start enjoying being in control. A passion for managing money from an early age can also lead to a lucrative career in accounting, since those skills are always in demand.
It’s not always easy, especially during times when you have stresses around money. You don’t want to make money feel or sound like a burden, but you also don’t want to trivialise it. Take it gently, include money talk as part of your normal family conversations, and help children see the rewards of confidently handing their own money as they grow.