My 5-year-old stared at me through suspicious eyes while I explained to him why we couldn't just go to dinner. It wasn't in the budget. He pointed to my purse and said, "You have a card, right? Can't you just use the card?" That's when I knew I had missed a very important point while teaching my children about money. I set to work researching the subject of money and kids. Here is what I learned.
1. It's never too early to use physical money
If your child can speak, she can learn what money is and how to use it. Let your children use physical money when they are small. Have them pay the parking meter, hand the money to the cashier, or give money to a church or other donation organization. The act of letting physical money leave their hands helps them understand the flow of money. Here are some simple ways to help them learn.
Tape money to a paper with its amount and name so smaller children can start to understand the value of each piece.
Let your children pay for items at the store.
2. Help them understand the value of work
The world works mostly in plastic now, so children don't always understand where the money comes from. Sit down and explain how money is earned, and setup a system for your children to earn money, either from you or others. On one wall in our house I use sticky notes to display the work I'm willing to pay my children for and the amount they will earn. As they complete the work they can bring me the note for a final inspection and payment. Here are some simple ideas.
Chore charts. They can be as simple or as grand as you like.
Let your older children hire themselves out for work. Dog walking, lawn mowing among other tasks.
When you make a large purchase, or go on a family vacation, get your kids involved in making decisions about what to do and how much it will cost.
Give older children a ledger. Post available jobs and how much you are able or willing to pay. Add them to the ledger. You are the bank. When they want to make a withdrawal, teach them how to write a check by filling out a fake check.
3. Tell money where to go
If your money doesn't know where to go, it will disappear. This is the greatest advice I received as a young adult. When your children receive money, set up envelopes, jars, bank accounts or whatever system you prefer and help them give their money marching orders. The basic systems include: saving, spending and charity. There are even piggy banks with dividers for these categories, some even include investing.
4. Help them give it away
Philanthropy is a great way to help children see the value of their money. Donations to a church, organization, or even time spent earning money for a good cause can instill character and charity in your children. There are many organizations across the world accepting donations. If your children are small, help them find one they can physically hand money or buy resources for. If they are old enough to understand how a bank account works help them make online donations or use the Internet to find organizations that could use volunteer work.
5. Budgeting is not old-fashioned
Delayed gratification is a difficult thing to learn today. This important concept, when learned young, can mean the difference between your child thriving as a young single adult, or having them begging you for money each month. This can be taught to small children.
We have a snack cupboard with sections for each child. Once a week I fill up the snacks, and my children are allowed free reign of their snacks with a warning. If they run out, they get only healthy snacks like carrot sticks or apples. The first week, they all ran out in 2 days. The next week, they managed to make it 5 days. The next week, they had snacks left over and were eating more fruits and vegetables to help it stretch. It has been a wonderful learning experience about budgeting.
Older children and teens can use budgeting tools, apps, or even written budgets to learn this concept. Even playing board games that involve money like Payday, Life or Monopoly can help a child understand budgeting.
Take out, in cash, your household budget and print out your bills. Have your children help you pay each bill and see what is left. This was a huge shocker for my kids and really helped them understand the flow of money.
6. Set goals and reach them
Working towards a goal can encourage a child to succeed. If your child wants a new toy, set up a chart with the price at the top and zero at the bottom. As your child earns money help her fill in the chart so she has a physical representation of her progress. This works with philanthropy, as well. If your child wants to make a donation to an organization and needs the help of the community, help him set up a way to track donations so he can view his progress in real-time. Spreadsheets, charts and graphs work wonderfully with children.
7. Be a responsible parent
The easiest way to teach your children is to let them watch you. If you are in the store looking for peanut butter, let your children help you decide which one is budget friendly. If you give them chores for money, make sure to pay them when they finish. Showing parental responsibility lets your children understand what you expect out of them.
Sometimes earning money can be hard, but managing that money should be a natural, easy process. Teach your children the value of money now so that they can enjoy the rewards of wise spending later.