Passing along to your children an understanding of how to use money responsibly is one of the hallmarks of parenting. You can start teaching “financial literacy” as early as the preschool years.

by Gerald Dlubala

Kids and money. This topic leads to endless discussions. To start, how and when should we start teaching our children about money and its value? It turns out that there is no one specific age to start children’s financial education.

The money experts at Visa and American Express simply advise parents to start teaching their children the value of money when the parents notice a “natural inquisitiveness” about the subject. What that means is, start early.

Earlier is always better. The benefits are immediate and can lead to long-term success. When we teach our children to be responsible in saving, we are at the same time planting the seed for avoiding the accumulation of debt. Children who extend this lesson into their future money-handling abilities will build a good base for future financial security.

Teaching money concepts to preschoolers

So how early is “early”? Most children can understand the basic principles of money as young as age 4.

If you think about it, young children go everywhere with their parents. Trips to the local grocery store can become a learning environment for your child, and possibly make shopping a little more interesting for yourself as well!

You can explain the idea of items “costing” money, why you are buying certain items, and why you have chosen one brand over another. You can begin to explain the principles of value and getting your money’s worth.

Instead of automatically reaching for that credit or debit card, make a point to occasionally pay with cash, showing your children the basics of counting money and receiving change.

The benefits of giving your child an allowance

The basic understanding you teach to your toddlers is invaluable when your children are a little older and it is time for them to understand where this spending money comes from. For many children, that will mean the ever-popular allowance.

After children have been exposed to money concepts for a time and they become more aware, allowances become an important tool in their development. Allowances are most effective when both parents and children agree on the actual amount and for what specific items the allowance is to be used.

Parents have different beliefs about which job duties qualify for allowances. Some parents are happy to give allowances based on general work done around the house. Others believe that everyday chores are part of the child’s personal responsibility, and prefer to pay allowances for extra chores such as garden work and car washing.

Whatever you choose, explain to your children that their allowance is to be earned, and that they can spend only what they earn.

Consistency is a must. Just as you expect your paycheck to be delivered on schedule, your children should know that if their part of the agreement is completed, then their “paycheck” will be there on time too.

Allowances also offer parents a chance to teach their children basic money management. You can require that a portion of the allowance be set aside in some type of savings plan. This can range from a simple piggy bank or a jar that toddlers have decorated themselves to a youth savings account at your local bank.

Whatever you do, keep the children involved so that they can see their savings add up and realize that this money is not simply a part of their allowance that they’re not receiving.

Keeping track and making choices

Two essential money skills are keeping track of what you’re saving and spending, and learning to use your money wisely. Here are some more tips that will encourage those skills in your children.

● Try to pay allowances in dollar bills instead of larger bills. This allows children to easily count their money and then divide it depending how much they are going to put away and save.

● Let children set a savings goal to allow them to see the effects of routinely putting away a certain amount of their earnings. Once enough is saved in the piggy bank, you can take even young children to the bank and let them open a youth savings account. Show them how their savings will grow, including interest. Online access to the savings account gives the children even more opportunity to watch “their” money.

●  Recognize that children will want to buy things with their newfound wealth. Guide them without criticizing them. They may want to spend their money on something you consider foolish, but they consider a luxury. In the end, it is “their” money.

●  Let your children pay for their purchases themselves. The mental impact of actually handing over their own money for an item they consider necessary is much more of an education than if you do this for them, or if they pay you back at a later time.

●  Encourage your children to keep records of their purchases by keeping a journal or the actual receipts from the purchases. This is a good way to remind children of where their money is going. This is also a handy reference of how they could have saved their money for a more important item, when previous, less important purchases are added up.

●  Help your children to plan ahead for certain goals and then to keep track of their progression towards those goals.

The skills you teach your children today will allow them to become responsible in the future. Our children can be greatly influenced by our attitudes and values. The way we feel about and use money affects our children in both positive and negative ways.

Financial responsibility has become one of the hallmarks of parenting children. And who knows—by making an effort to teach our children how to be financially responsible, we may even learn a little about ourselves along the way.

 

A lifelong St. Louis resident, Gerald Dlubala has spent the last 15 years writing about topics including health and wellness; education; family matters; and the wonder, humor, and lessons of everyday life.

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