Money makes the world go round, but teaching your children how to be financially responsible can be hard. Money, and the value of things, can feel like abstract concepts to children. Pieces of paper and small, round discs that can be exchanged for items are tangible, but we are becoming a cashless society. Buying online means transactions take place at the click of a button, and at the mall, we pay with credit cards, cell phones, and even our watches. It is no wonder children are confused!
Here are five tips for teaching your kids financial responsibility, whatever their age.
The Under Threes
If you have a toddler, take them shopping with you. Allow them to see the transaction take place and ideally use cash so they can visually see the exchange of money for goods. Explain that, before taking things home, we need to pay for them. Kids love playing pretend, so roleplay whenever you can – make a store of empty food boxes and bottles and take turns to be the customer and the shopkeeper. Use real coins, so they get used to the idea of swapping money for what they want to buy.
Preschoolers and Infants
As children get slightly older and familiar with numbers, give your children a small amount of money when you go shopping to choose a treat. Talk with them about the amount they have and explain that they will need to look at the price of items to see whether they have enough money to buy them. Allow them to take ownership of the process of purchasing the item, handing over the money to the cashier, and carrying their purchase afterward.
Middle Graders
Once your child reaches middle grade, they will have some understanding of basic finances. They will be aware you need to pay for items and familiar with cash. Teach them about alternative methods of payment by allowing them to watch you make payments. Talk to them about things you pay for that they might not have thought about – rent and bills, for example. This is a great age to start giving pocket money so they can have a certain amount of spending autonomy, so offer them set amounts for helping with jobs around the house. If they ask for larger items such as toys, encourage saving with a piggy bank or savings jar and a sticker chart, so they learn the importance of putting money aside.
High Schoolers
As your child starts high school, they will be beginning to be more independent. They might be walking to school with friends, hanging out at the mall, or going for ice cream with their peers. Allowing them more financial responsibility at this point is a must, and it can be a good idea to open their own bank account to pay for day-to-day items such as buses and school lunches.
There are bank accounts out there that send you an alert whenever your child spends money, and these can be an effective way to monitor their spending from a distance. Put a set amount of money in each week and explain to them that they need to budget as it needs to last them the whole week. Discuss the expected cost of things and explain what will happen if they overspend. Having a separate account to save birthday money can be useful at this point, as can talking about offers and discounts. Freshly updated digital coupons are available online and can be a great way for your child to learn how to shop around for the best deals.
Older Children
As your child heads to college or leaves home, they will still need your support when it comes to financial matters. Sit down with them and help them with a budget, being sure to explain the importance of sticking to it. Encourage them to take a part-time job even if they are studying, so they have additional spending money. Talk about the impact of buying on credit and the long-lasting impact of getting in debt.
Financial responsibility is one of the most important lessons your child will learn, so teach them well from an early age.
