How are you doing with teaching your children about money? Do you need some ideas on how to start?
As soon as children can count, introduce them to money. Keep in mind the following guidelines when educating children about money or other subjects:
- Guide and advise, rather than direct and dictate. Let children have responsibility for their decisions.
- Encourage and praise rather than criticize and rebuke.
- Allow children to make and learn from mistakes and successes.
- Use opportunities to include all family members in money management decisions and activities, as appropriate for their age.
- Explain to children what they can and cannot do, and the consequences of going beyond their limits.
- As children get older, include them in discussions of limits and consequences.
- Money lessons and your expectations need to be age-appropriate. There are many opportunities to teach money concepts to your children.
Set up a three-jar system, "spending, savings and sharing." All money earned or received as a gift should not be available for spending, but divided among the jars. Sharing includes gifts or donations to others.
When the jar is full, that money can go into a savings account or used for a purchase.
To encourage saving, let your child make the decision on account withdrawals. Eliminate the "I wants" at the store checkout by allowing children to spend only their own money when they go shopping with you.
- Avoid criticizing when children make poor decisions. Focus on what happened and what was learned.
- Always try to recognize responsible behavior.
Allowances help empower the child and provide money management lessons. It's also appropriate to expect all family members to perform unpaid, routine household chores appropriate for their abilities. Give a base allowance, which may be tied to chores. If chores are not completed, the penalty should be lost privileges. Always provide chore opportunities for additional earnings.
Shift more spending decisions to your child, which reduces the need for the child to ask for money, and encourages wise spending.
Teach the difference between wanting and needing. For an older child, create a list with three columns — needs, wants and wishes. This comparison helps children see that the three do not go together.
An important lesson is how to track earnings, spending and savings in order to know how you're doing financially. Ask your child to write down transactions into specific categories each month, then review together.
Another method for learning about money is to use the grocery store as your classroom. Demonstrate how to plan a meal, use leftovers, shop by unit price, question coupon or sale values, figure costs of eating out (including tax and tip) and ways to create lower cost options.
Establish a regular schedule for a family financial discussion. Report current balances and concerns and work together on solutions to reduce expenses, avoid credit debt and increase savings.
Sometimes the best motivation for wise spending is to plan how to do more with the money you save.
For more kids and money ideas, check out: Life.familyeducation.com/money-and-kids or www.kids.gov and search for "money."
Lynn Little is a family and consumer sciences educator with University of Maryland Extension in Washington County.