The modern world is a web of things for sale, and marketers all do their best to make people think buying is necessary. At the same time, there is social pressure to “keep up with the Joneses.” In this whirlwind of financial activity, it’s increasingly difficult to teach children about money. Developing solid financial literacy for kids and showing children how to value money takes conscious effort. Some good ways to bring children and money together positively are:
- Give them a way to earn. Children learn quickly when they have hands-on learning opportunities. When a parent or caregiver provides a child with a means to work for money, the child begins to understand how much work equates to specific monetary goals. Introduce a very young toddler to the work and reward system with simple tasks such as picking up toys. Use stickers in place of money at first, making stickers of the child’s favorite color require more work to get. With older kids, other tasks such as collecting pop bottles, folding laundry and rinsing dishes all can have value.
- Teach them to spend (set goals). Although it’s important to teach children to save, sometimes children completely hoard earnings. This can be a problem because it can cause children to lose the motivation to continue working. If work halts, savings cannot grow and the child becomes lax on chores. Children also need to understand that not all earnings are savable, with much of income going to necessities. To develop financial literacy in smart spending, set some small financial goals with your child. If your child cannot decide how he’d like to spend his money, reinforce the concept that some earnings eventually must be spent by “charging” for things around the house, such as having them give you a little of their money to get online. Even a fork can become something for your child to purchase.
- Give them some budgetary control. Parents and caregivers often give children an allowance. This is not necessarily bad, as it means a child can make some choices about how to spend her own allowance money. When you assign some money from the budget to your child, however, you teach a broader concept of how the funds fit into total earnings and expenditures. Modifying the amount of money assigned means looking at other budget areas. You also do not need to give the child a separate allowance, as he still has control over some expenditures or savings. A good option is to let your child have control over $10 to $20 of the food budget, as you know you’ll spend money on food anyway.
- Explain that technology represents, but is not actually, money. Too often, children don’t understand the value of money because they think that “with Visa, it’s free.” Explain how technologies such as ATMs, electronic deposits and withdrawals, debit and credit cards and similar items are stand-ins for real cash. Tell your child how these technologies are designed to increase efficiency and how they can be safer than carrying wads of cash around.
- Plan purchases, comparison shop and experiment with coupons. Even when your child understands the difference between need and want, similar businesses don’t always have the same prices on the same items. In the same way, failing to plan purchases can be costly, forcing you to make more trips to the store or spend when items are priced high. By contrast, planning and comparison shopping shows your child the real value something has on the market while decreasing the likelihood of getting scammed out of savings. Going through coupons can teach your child how to be truly consumer savvy.
- Talk about money regularly. By talking about money on a regular basis, children learn that a) money is important enough to spend time on, b) money isn’t taboo, even if financial problems are present and c) you trust them to provide monetary input or be part of the financial process. Discuss world and social events that affect money and prices, using real-life examples of successes and failures.
- Say no. Out of everything a parent or caregiver can do to teach kids about money and value, this is probably the biggest. When you say no, your child learns the difference between want and need. He also learns that funds are not limitless and that he thus has to make priorities when spending or saving.