At some point, your child will need to learn about money. Starting your child off at an early age is not a bad idea. Besides, teaching him or her about money can be a fun and rewarding activity. But it has to be done right.
Your child will eventually sense and absorb your own attitudes toward money whether you teach your child or not. And once your child reaches an age where targeted advertisements begin to make an impact, money discussions will eventually become necessary.
As we all know, money plays a very important role in the world. So as your child develops an understanding of the world, it helps to instill a positive view toward money rather than a negative one. Here are a few tips to help you get started.
Understand your own views toward money (do this first!)
What does money mean to you personally, professionally, and as a parent? We all agree that money is necessary and relatively scarce. But do you view it in a positive or negative light? Before you begin teaching your child about money, you must first be aware of how you want your child to understand money, and whether this transference of knowledge agrees or disagrees with your own beliefs.
Let’s step back for a moment and view money from an objective perspective. On one hand, money is simply an economic good used to facilitate the exchange of other goods. That’s all it is. You pay money to buy goods and receive money by selling goods or services. On the other hand, we also know that views toward money exceed money’s function. Money is a rare commodity that happens to have social, cultural, and even moral implications. We’ve all been raised with certain beliefs about money, some healthy and some not.
Although money can be a complex matter, when it comes to teaching your children about money, it’s best to keep it simple, straightforward, and positive.
Don’t associate money with negativity
We’ve all heard the saying “money is the root of all evil.” Really? If a child were to believe such a thing, then the entire world–one in which people constantly need to buy and sell things–might seem wrong and contradictory. There are variants of this belief associating money with greed, abuse of power, and a host of other awful things. Exposing a child to such beliefs can be dangerous. Associating money with morals is both overly simplistic and harmful.
To make things worse, if children are told that they (or their parents) are “poor,” a term which can instill a lingering negative mindset, then money is seen as the cause of their victimization. Combine all of the negative beliefs above and you end up with a vicious loop that doesn’t seem to have any reasonable solution. You don’t want your children establishing these views so early in life.
Teach your child the difference between needs and wants
The ability to differentiate between needs and wants depends on a child’s age and maturity. Of course, teaching kids the difference between both will require a follow-up lesson on delayed gratification. Needs require immediate fulfillment while things in the ‘wants’ category can be delayed.
There’s an excellent arts and crafts activity on the icanteachmychild.com website that you can use to help teach your kid how to distinguish between the two. If you are up to the task of taking on a more teacher-like approach, Brainpop also has some good resources to check out.
The main point is that as children learn how to intellectually distinguish needs from wants, they will eventually develop the emotional maturity to accept why certain things need to be purchased right away while other things have to wait.
Help your child learn how to count, spend, and save money
Children can begin learning about money as early as age 3. Give your child some spending money and have her buy something. This can help your child understand that purchasable goods have monetary value. Soon they’ll begin to notice that monetary values differ depending on the goods.
Eventually, your child will come across an item s/he wants to buy but cannot afford. This is where allowances come into play. Decide on an allowance amount and help your child come up with a plan to manage the money:
- % of money to go into a piggy bank (for longer-term savings)
- % of money to be used for quick spending
Using this simple plan, children can learn how to count, save, and manage money while experiencing the time value of money (saving and waiting). You can even give your child the experience of time-value through accumulated interest. Simply add an interest schedule to the piggy bank deposits. This way you can teach your kid how money in a bank can grow without having to explain the theory behind interest (a complicated task which you can save for another day…several years into the future).
Expand your child’s notion of generosity
Your child’s first lesson on generosity begins with sharing. Children have different personalities and some take longer than others to feel comfortable sharing toys, turns, or any other item typically shared between children. Once they become more aware of the joyful feelings that sharing can bring, it’s easy to start building upon that foundation.
Wishlist and giving list
Holidays provide wonderful opportunities to both give and receive. Help your child develop a wish list and a giving list. Include your child in the gift-buying and gift-wrapping process. Emphasize how happy the recipient will be when receiving the gift.
Donating percentage of allowance
When your child receives allowance money, you might want to talk about setting aside a small percentage for donations to a local charity or food bank. You can also ask your child to pick out toys or clothes that he no longer needs and donate them to charity. In either case, talk about how other children are in need of food, clothes, and toys, and how happy they will be to receive them.
Donating canned goods
If you have non-expired canned goods that hasn’t been consumed in 6 months, ask your children to collect them from the pantry. Tell them that you are giving the canned goods to families that really need them.
Seasonal giving is something to which we become accustomed. Of course we’re supposed to give (and receive) cards and presents during certain holidays and birthdays. But there are certain instances where an out-of-season gift can make a very big difference.
Ask your children to make cards or wrap presents for people outside of their immediate circle of friends and family. Perhaps they can contribute to patients of a local children’s hospital. Everyone appreciates random acts of kindness. Experience the joy of giving out of season for the sake of making someone feel better might be a rewarding lesson for your children.
Similar to our experiences, your children will eventually grow up to learn boundaries in giving, competition, and struggle in attaining material needs and wants. But establishing a foundation of generosity may help give your children a healthy and balanced view as they learn to make their way through a world in which scarcity and abundance must be skillfully navigated.
Play money games with your child
There are numerous online sites with money games for kids as there are board games. For example PBS Kids Mad Money is an interesting online game for older kids that focuses on managing expenses in order to save enough for a big ticket item. Topmarks is a UK-based site that focuses on the math aspect of money. As far as board games go kidmoney.about.com provides a nice review of six money-focused board games for kids.
Although many educators will argue that Monopoly (or Monopoly Junior) is more of an entertainment-driven game rather than an educational one, it remains among my all-time favorites. In addition to providing kids with the opportunity to count money and change, Monopoly introduces kids to the concepts of risk, chance, and investment.
Yes, the chance element in the game can often trump skill, but it also adds a fun (and sometimes frustrating) element of surprise, forcing the player to make the best possible investment decision in the face of indeterminacy and risk. In the case of Monopoly Junior, should your child lose a game, the duration of play is fairly short (unlike regular Monopoly). Your child will learn that money is sometimes lost and ventures do fail. But you can always play again. Besides, it’s a fun game.
Teach your child how to earn money through chores
Eventually, your kid will need to learn that money doesn’t grow on trees. Money is earned. That’s why you go to work. The pride of having worked to earn money and the sense that larger tasks can yield higher pay are things that your child can learn. Set aside reasonable chores for a given price. As your child gets older, he might attempt to negotiate the monetary value of different kinds of chores, size of chores, or effort/pay ratio. This reveals a healthy ability to grasp and question concepts about money.
Show your child how you make wise buying decisions
You can begin by taking your child shopping and pointing out which items fall into the needs and wants category. As he gets older, you can start demonstrating how different items of the same quality can have different prices. Whether you purchase the cheaper or more expensive item, it’s important to explain how quality or price informed your buying decisions.
Entrepreneurship programs for kids
Check to see if there are any local entrepreneurship programs for young kids. Many of these creativity-focused programs teach kids design thinking skills, problem-oriented skills (how to construct interesting problems and solutions), and basic entrepreneurial concepts. When done well, these programs allow kids to experience the exciting aspects of a business venture in a positive, safe, and risk-free environment. They also emphasize the creative and innovative aspects of business and enterprise. Codingfortreasure.com located in Pasadena, CA is an example of such a program.
For children 6th grade and up, have them read Whatever Happened to Penny Candy
Richard Maybury’s book, Whatever Happened to Penny Candy, uses events in Ancient Rome to explain basic principles of economics, finance, and business. It is a clearly written and fun explanation of various concepts that are relevant and applicable to our understanding of current economics.
Though written for an audience with an 8th grade reading level, some parents and educators have assigned it to 6th grade children with success. Check it out for yourself and you may find that it makes for an easy introduction to economics, and a fun-to-read supplement to any economics textbook.
Conclusion: money smarts and generosity
We all want our children to develop strong financial skills alongside every other necessary skill they learn as they mature. We also want our children to develop a strong sense of fairness and generosity among other traits. Our children will eventually grow up to face their own unique personal and financial challenges. But with a healthy foundation rooted in the positive aspects of social relationships, money, and self knowledge, we can rest assured that they will have the right tools and mindset to tackle any challenges before them as they strive to build an awesome life.