Ways to teach kids about money
Children form their first impressions about money from their parents during their most formative years. So, teaching your children how to save and invest should be an ongoing part of their financial education.
The following list contains some suggestions on what you as a parent can do to develop your children’s financial literacy.
1. Help young children understand money.
When your children accompany you to the store, they easily make the connection between you putting items onto the conveyor belt and paying the cashier at the end of the transaction. However, we often pay with credit or debit cards and less and less with actual dollars. So, one easy way to begin teaching your kids about money is to let them interact with it. Show and let them handle real dollar bills, quarters, dimes, nickels, and pennies. Explain how 5 pennies equal a nickel, and that different combinations of coins can add up to and equal a dollar. Young children also enjoy having a piggy bank or see-through plastic jar so they can watch their savings grow.
2. Play money games.
Another way to reinforce money skills is by playing money games. Classic games, such as the Monopoly Junior and Monopoly, and Life, have been around for decades and are still enjoyed by families today. Not to mention the plethora of money-related games on toy shelves available in stores. For the younger set, you can create your own money games at home, such as playing store or bank, or read them counting books or books with money-related themes.
3. Go on a field trip or start a collection.
You can also take your children on a trip to see how money is made at one of the U.S. Mints or the Federal Reserve. Collecting U.S. and foreign coins and discussing the concepts of bartering and trade are other ways to teach your kids about money.
4. Increase your financial literacy.
You can never go wrong by increasing your own financial IQ. But, before you start educating yourself, first consider your own feelings about saving and investing. Would you consider it to be a positive or negative one? Do you argue or worry about money? Do you wish you could have more of it? Do you look at money as an opportunity to invest? Oftentimes, your mindset establishes how you interact with money. Increase your financial knowledge by attending local financial workshops, many of which are free. Read books, blogs, and articles on financial topics, especially on how to save and invest.
5. Change your mindset.
As a parent, have you ever found yourself saying the words, “No, we can’t afford it”? Always strive to make any discussion about money a positive one. If your children ask for an item, such as a new toy or a bicycle, ask them how they think they might be able to afford it. You might be surprised at the creative answers you receive. Sit down with your child and make a list of the possibilities. Will the item ever be on sale? Is it cheaper at a different store or online? Is there a way to buy a gently-used version? Is there something you can go without in order to redistribute saved money toward the desired item? Are there ways that your child can earn and save money to work toward the goal of purchasing the item? Keep your eyes and mind open for opportunities which may present themselves now that you are open to the idea that buying the item is a possibility.
6. Emphasize savings.
In order to save money, it must be earned or received. One example is when your children receive monetary gifts at birthdays, special occasions, and holidays. When they do, explain why they need to save some of the money. That doesn’t mean that you can’t buy them a toy, clothing, or other things they may need. But, make sure they know why they need to save some, too. Some ways kids can earn money are by selling items at yard sales, making items to sell, babysitting, pet sitting, or lawn mowing, or extra tasks at home aside from their usual chores. Have them keep track of their earnings and earmark a certain amount for their savings.
7. Earn allowances.
Some families give their children an allowance for doing household chores in order to teach them how to budget. Others expect their children to help out with family chores without pay but give them money as needed. Whatever method you choose, having your child keep a written record or chart of their expenditures helps them keep their spending in perspective. The same can be done with savings. Establishing a savings account for your child will help them see how their can money. Help them establish a savings goal from month to month or year to year, and develop a plan to reach that goal. This might even include you matching their contribution with the stipulation that once money is put into the savings account, it cannot be taken out.
8. Give back.
One way to teach your kids about investing is explaining that money is not just meant to be saved or spent, but also donated. One way involves investing in people by giving back. Set aside money to be donated to church or charity, or to help someone in need. Oftentimes, communities host walking or running events to raise funds for a cause. At the holidays, many organizations request toys or clothing donations for children and families. Giving money to help others can make an amazing impact on a community.
9. Investing and establishing credit.
Some states offer prepaid college savings plans to help save for your children’s college education. If you opt in on one, show your child how saving now reaps an investment in their education later. As your children get older, you can discuss topics, such as investing in companies, stocks, bonds, CDs, and real estate. In fact, there are a variety of online investing games available for teens to play. Also, explain the importance of establishing good credit by not charging more on credit cards than what you can afford and paying off the balance every month.