Chores. Allowance. Rewards for a job well done. There are various ways you can put a little bit of money in your child’s pocket. But, parents often wonder how to teach their child the value of money? How do you teach them to spend wisely and save for a rainy day? A child’s brain is wired for the here and now and the moment they have some cash in their pocket it begins burning a hole. Even though your child may really want that $50 Lego set at Target, saving up for it can be a daunting task. Most children would rather have the instant gratification of the $5 toy than painfully saving up for the bigger expensive one. So what are some effective techniques for teaching children about money?
Pay in Cash
Whenever possible, pay in cash in front of your children so they can see the exchange of money for goods. The old saying “money doesn’t grow on trees” has been replaced for modern children with the idea that money magically comes from a plastic card. The concept of having money in a bank somewhere is too abstract for kids to grasp. I know I have been told by my children more than once “Just use your card to get more money.” Sorry kid, it’s not a magic lamp, it doesn’t work that way. When they wish to buy something with their cash have them bring it to the store to pay themselves. Even if you are making up the difference by using a card at least they are seeing some money being exchanged.
Each Chore Has a Price
Create a chore chart and the amount they will earn for completing each chore. A chore chart should not include things they are expected to do anyway such as keep their room tidy, clean up after themselves, put their dishes in the sink etc. Instead it should be those extra jobs that could benefit Mom and Dad if they are done. For example, taking the trash out, vacuuming, and doing their own laundry. You will have to find the right set of chores that work for your household, but by making a list and affixing a cash amount to it they will understand that hard work pays.
Get a Piggy Bank
Seems simple but it’s true. Get them a bank to store their money in. Every time one of mine gets some cash they love to pour it all out and count it again. By having a special place to watch their money grow they will be more inclined to save it. A bank doesn’t have to be anything fancy, it can be as simple as a coffee tin with a slot in the top. As long as it is all theirs it will do the trick!
Avoid Telling Children You Can’t Afford Something
Our children think we are cash machines and that being an adult means we can purchase whatever we wish, we know that’s not the case, but we could go blue in the face trying to explain that to little ones. When your children ask for big things that just aren’t in the budget simply tell them that. When you tell children you can’t afford something it may scare them into thinking you can’t afford essentials such as food and clothes. Instead say, “I haven’t budgeted for that this month” or “I don’t have extra money for that right now.” These phrases will highlight for your child that big things need to be saved up for.
Talk About Money
This doesn’t mean your children need to know how much you make or what the mortgage payment is, but don’t shy away from talking about the cost of everyday things. Too many parents make the mistake of not educating their children on money and then when they get out in the real world as young adults they have no concept on how it works! Start a savings account for your child so they can put money away over time and learn about banking and interest. When kids learn about money they are more responsible with it as adults.
Role Play With Them
Engage in games that are centered around commerce. Pretend to run a coffee shop, doctor’s office or a grocery store. Discuss how much things cost and use play money to pay and ask for change! Games like Monopoly and Life are another option to help your child learn money concepts. Purchase a set of play money and a toy register and let your child be the boss of their own business!
The important thing is provide plenty of opportunities for your children to see money in action, to have hands on experience earning it and spending it. Talk through purchases your child may wish to make to make sure they fully understand why it is that they want an item. Sometimes, you may need to bite your tongue and let them make the bad purchase so that it can be used as a teachable moment once the realization hits that their money could have been better spent. I have spent what felt like hours in the toy aisles of Target with my oldest spending birthday and Christmas cash and as tedious as it is at times, I am glad he is being thorough and thought out in his buying process. As with most things in parenting, you want to guide them in the right direction, offer advice and help as needed, but also allow enough space for questions and explorations. Teaching your kids about money is definitely a knowledge is power situation!