5 Ways to Teach Money Management to Children
- Talk openly about money with your children! Whether it is a salary increase or a tight budget for the month, you should not hide the existence of money, especially money issues, from your children. Simply, it is important to be truthful with your child about finances, especially when there is a change that makes funds tighter. Older kids will understand it quicker, but it is still important to honestly communicate money issues to children of all ages. An example of a statement you can make to a young child can be as simple as “we will not be able to afford your favorite snack this week, but we can help you find another tasty treat that is less expensive.”
- Do not allow your children an “open wallet” policy, even if you can afford it. By handing over money or buying a toy whenever your child asks, you eliminate their potential to easily learn that money is not available for their every whim. Instead of simply giving them money because they want it, show them that people work for money. See step 3.
- Give them an allowance for completing age-appropriate chores. Make a chore chart for your children, give a dollar amount to each chore, and pay them at the end of the week for the chores they completed. An example of a “typical workweek” for your children could be $0.25 a day ($1.25 for Monday-Friday) for making their bed and $0.75 a day ($3.75 for Monday-Friday) for keeping their room clean. If he or she wants to help you clean the house, you can give them $3 to $5 an hour for their help. You can give them “over time” for completing these chores on weekends. Increase the amount they earn as your child gets older. This will help instill that they have to work for their money and that it does not get handed to them freely. Click here for 22 different chore chart ideas!
- Act as their financial institution. This includes offering savings incentives (whether it’s paying them interest or matching their first $20), putting their money in the “bank” (decorate a piggy bank with them!), or lending money to them. If they want something they cannot afford, they either have to wait until they have saved up enough money or ask their lender for the rest of the money (complete with a “contract” on paying it back).
- Involve them in money management situations. As your child starts to understand the value of money, start asking them for “advice” on either real or made up situations involving money. This will help them start thinking through important concepts about money. If they do not give a “smart” answer, take the time to explain to them a better solution and why it is better.
Overall, money should not be a topic that is excluded from conversations with and around your children. It is important to start teaching them the value of money at a young age because it will help lay the foundation for strong money management skills when they are adults.
What things do you wish you were taught about money as a child?
~Sarah Proto, VP of Unbanking