Teaching kids about money is a critical parenting task. As soon as your child can count, notes Family Education, you should start collecting coins and talking about money using clear language. The concept of money having value is somewhat abstract. The more you can explain in real-world terms what something costs and what that cost means in terms of time spent working or in comparison to another like item, the better you can teach your kids the value of money.
Step 1
Share your family values about money. Be clear about how much your child should save, give and spend. Guide his purchases so that your child understands what your family thinks is worth spending money on compared to items that don't have value for your family. For example, you may choose to spend money on family vacations rather than designer clothing.
Step 2
Provide an age-appropriate allowance. You can give your child a weekly or monthly allowance, depending on your circumstances. A good guideline is for a child's allowance to equal half her age, reports Family Education. So a 4-year-old would get $2 every allowance period. Help your child set aside part of her allowance to give to whatever organization you support regularly. This will help your child understand the impact money can have on supporting a cause or relief effort, for example.
Step 3
Open a bank account to deposit his savings. Most banks offer a special kids' program to encourage children to save money. These programs may provide special incentives for kids to either come in on a regular basis or reach a specific monetary goal. This activity helps kids understand not only how banks work, but also the value of regular, planned savings.
Step 4
Let your child take on some small jobs. Children as young as 12 can babysit, house sit or pet sit. Help your child track the hours spent on a job, the amount she is being paid and the resultant hourly rate she generates. This activity helps kids understand directly the effort it takes to earn money.
Step 5
Teach when shopping. At the grocery or department store, talk about how much money something costs. Explain how coupons work, why you plan ahead for shopping, what a "loss leader" is in terms of getting shoppers into the store--back-to-school shopping is an especially good time for this conversation--and what your budget is for certain items. Teach kids to compare name brands to store brands to give them a sense of what things cost to produce versus the price at which they are sold.
Tips and Warnings
- Not all experts agree on whether an allowance should be tied to chores or simply given to a child as pocket money. Choose the option that works best for your family.
