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Teaching Your Child About Money
When is a good time to talk with your child about money? Today. And the next day, and the day after that.
It's never too early to help your child develop money management skills. Children learn by watching; their attitudes towards money will be heavily influenced by how they see you earn, borrow, spend, save, share, invest, and protect your wealth. Do your best to model good behavior, but also be deliberate in talking about it to help them learn about earning, spending, and saving money.
Tips on teaching your child about money
- Start the conversation by talking about money using real bills and coins, to give your child a tangible view of finances. Show your child how coins add up to bills using simple math. Help them understand that money can be used to pay for things they want or need. Play money related games at home and teach them how to make change.
- While it’s tempting to just pay for things like groceries with a debit or credit card, take time to conduct some transactions in front of your child using cash. This gives them concrete association between money and real purchases of things your family needs. Without going into too much detail, explain how sales tax works so they understand there’s more involved in paying for things than just the posted price. Let them purchase things like a treat or small toy so they can make an actual transaction. Have them use money from their piggy bank and help them count the money before and after the purchase, so they understand that spending leaves them with less ‘in the bank.’
- Help your kids learn how to differentiate between needs and wants. For example, have them help you develop your grocery shopping list and take them shopping. If you child wants you to purchase something not on the list, help them understand why it doesn’t go into the cart.
- As your child gets a bit older, introduce the concept of allowance. Allow them to earn additional money by doing extra chores, which helps them link the concept of work with earning money. Establish a savings account for them at Global and help them set goals to purchase bigger items, so they understand the value of budgeting and saving. And when they do spend their money, allow them to make the choices; supervise but don’t dictate how your child spends money.
- Many parents encourage their child to divide their allowance into thirds–one-third for spending, one-third for saving and one-third for charity. Choose a plan that fits your family’s values. When you donate money, talk about it with your child so they learn how to make it part of their spending plan. Let your child choose a charitable cause that is meaningful to them. Then take them to a donation box so they can physically give their money away.
Start the discussion
Many of us grew up in families where talking about money was taboo, making it mysterious and scary. By talking openly about money and by appropriately including your child in family financial discussions, you'll be able to share your values about wealth in a healthy way without lecturing.
Everyone knows that children watch what we do, so when it comes to money, show them the behavior you want them to learn. Avoid having your child associate money with anxiety; talk about how planning and budgeting helps you achieve goals and avoid financial stress. When things go wrong—your car breaks down, for example—talk about how you will pay for repairs using money you've set aside for emergencies such as this. Do your best to talk and show them how earning and spending money can be fun.
