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5 Easy Ways to Teach Children About Money

Suzanne Barchers  |  April 11, 2023

It’s good to talk about money with your young kids, on a daily basis, to help set them up for success as adults. 

We’re born to want everything — now. In babies, the instinct makes sense. However, the last thing you want is to raise a child unable to curb the need for instant gratification. After all, that’s a fast track to shopping excursion tantrums, and later in life, potential financial instability. 

So, how do you help children understand that when you tap your card at the grocery store, you’re not making a mysterious, magical transaction? The key to helping little ones understand the way money works is by talking about money on a daily basis. And it’s best to start before age 8.

Why 8? An often-cited Cambridge University study shows that financial habits tend to be pretty engrained by age 7. In other words, by the time your child lands in third grade, they’ve probably formed their thoughts around money. Consequently, starting a conversation with them about dollars and cents when they’re still a preschooler or kindergartner is wise.

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Now, I can hear what you’re thinking: “My child flips from subject to subject. Does this really matter?” It does, and here’s why: By about age 5, kids can start understanding and embracing logic and math. They might not be ready for a symposium on the economic ramifications of long-term inflation on the average household, but they’re certainly primed to process basic arithmetic.

Unfortunately, most families don’t take the time to explain the process of earning, saving, spending, and budgeting with their kids. This comes from a warm-hearted place: We don’t want children worrying. Therefore, we shield them. But it’s not right to shield them from the reality of how money works. Below are some ways to help your child grasp important money concepts in a fun way that won’t overwhelm them:

Look for chances to discuss money wants versus needs

Do you wear an inexpensive watch instead of a smartwatch? Explain why to your kids. Children aren’t always attuned to wants versus needs. Discussing a topic such as making one choice over another helps them see the difference. 

For example, maybe you support a specific charity by cutting back on certain nonessential expenses. It’s good to tell your child that you’re picking the less expensive cereal so that you have more money to donate to the food bank and help people who aren’t as fortunate. 

Help kids visualize how money works

Show your child 10 $1 bills. Then, talk about how you could use that money. You could buy two $5 cups of coffee. Or, you could buy 10 cans of soup. 

Brainstorm ways to divide the money with your kids. This encourages them to have a better understanding of how to allocate finances. You might be surprised at how clever your kids can be at suggesting ways to make the most of those $10!

Start saving as a family

Whether you set up a savings account online or put spare change in a big jar, your kids will be able to see how money can grow. To show how money can grow faster, you might want to break some of your own pricey habits, such as eating lunch out with colleagues every day. 

Together, you can celebrate every quarter or dollar that goes into your savings. Occasionally, you can dip into your savings to do something special, like go out to eat at your favorite restaurant. Again, this shows that waiting for something can be worth it!

Start an allowance on your child’s fifth (or next) birthday

I’m a firm believer that allowances can be excellent money-learning tools for kids. On your child’s fifth birthday, tell them they’ll receive $5 every Saturday. The only caveat? You’ll sit down with them and help them decide where the money goes, such as in the bank, to charity, etc.

Over time, you might want to augment the allowance by offering additional chores beyond regular chores, which should not be attached to the allowance. This allows your children to see how money can be earned, giving them a better sense of what you mean when you say you get paid for your work.

Continue teaching financial management topics

As your children grow, they can handle other money management insights. Take borrowing, for instance. There are lots of online calculators that show what happens if you don’t pay off your credit cards in a timely fashion. Regrettably, it’s not uncommon for college students to get into debt because they don’t realize how spending on credit can balloon. If you teach your kids the pitfalls of indiscriminate spending early, they’ll learn to manage their impulses — and their money. Sooner or later, your child will be an adult. When that time comes, you’ll fret less knowing that you made financial conversations a priority early in life.


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