Lets face it, kids have no concept of money. When you go shopping with them, they have a never-ending wish list, “Daddy, please can I get this? I love it more then anything”. We all know that our children cannot always have what they want, and contrary to their belief even if they use the word ‘please’. It is hard for children to understand why they cannot have the things they see on commercials or in the homes of friends and family. It is difficult for parents to explain the concept of money and that most everything in your house cost(s) money.
Here are some tips on teaching your kids the importance of money and how it works.
- Take young children to the supermarket. It is important for young children to begin to be part of the family expense process by seeing that their food is paid for with your money. Give your children the cash to hand to the cashier or show them how to pay by swiping your card. Tell them that you cannot take the food home unless they pay for it.
- As your children get older, find a way for them to be part of your bill paying process. Do your children know how much you pay for rent or your mortgage? Do they realize that every time they turn on a light and forget to turn it off, it costs you money? Do they know that the water that flows so easily from the sink or shower isn’t free? This will invoke numerous “Wow, that’s a lot of money” when reading they realize how much heat , hydro or even that cable/internet package costs.
- Give children of all ages financial choices so they can start to understand the decision making process. Young children can be given the choice of purchasing two different foods or two inexpensive toys. First, they must save it, then spend it, then experience the euphoria that comes from buying the item they wanted, but also what it feels like to lose some money in the process. This will reinforce the idea that it must then be saved again. Using real money is important. It’s only until they have grasped ‘real’ money can you move on to the more difficult concept of credit cards, loans, etc.
- Encourage them to earn and to budget their own money from a young age. Every household should have both expectations and ways to earn. This includes rewarding for good grades, chores or even picking up an old fashioned paper route. If your children earn money, they should have to divide it into amounts for purchasing and saving. It is good for them to save for something they want without our help.
- Want versus need. If your child wants a new lego set that costs a $200, explain to them how long it would take an adult to earn that amount of money. As adults we are often told no, whether it is from employers or the bank, and children need to hear it too.