Interactions with money are a regular part of our daily lives, and kids pay closer attention to these interactions than we think.
Whether you’re paying for items at a retail checkout, withdrawing money from an ATM, or looking over the costs of menu items at a restaurant, each day presents multiple opportunities to expose your children to healthy money habits and help them better understand how money works.
Although financial matters such as APRs and 401(k)s are too complex to introduce to young children, there are plenty of financial concepts that can be introduced early on to familiarize children with money and saving. Over time, this knowledge can provide the foundation for developing their own sophisticated money management strategies, equipping them with the financial literacy they need to navigate adult life and make wise financial decisions.
Eager to start teaching your kids about money? Here are six ways to start introducing easy money concepts today.
1. Teach young children about coins and their value.
Even before a child starts school, you can play a coin identification game to teach them the values of different coins. Once children understand these different values, you can open a pretend storefront and turn purchasing into a game: Have them exchange coins for items sold in the store, introducing the basic concepts of commerce.
Eventually, you can use these concepts—and the child’s savings in a piggy bank—to demonstrate how this works in a real-life situation. Bring them to a store and have them purchase a small item, such as a candy bar or small toy.
2. Ask your kids to help you clip coupons.
This is an easy chore that can also be an interactive teaching lesson. Tell your kids which coupons to cut from supermarket ads and other ads, and have them read off the value of those coupons.
Explain the concept of coupons as a savings tool, and bring them with you to the store to show them how those coupons save you money.
3. Provide a fixed allowance.
Whether or not you offer an allowance in exchange for chores, it’s good to give children access to a small income stream so they can develop money management habits on their own.
Big purchases may require multiple weeks of saving allowance money for those items. As parents, resist the urge to help them pay for those items instantly, and instead teach them the value of setting savings goals.
Over time, this allowance will teach them how to operate within a certain income limit and help them develop their own sensibilities regarding spending and saving.
4. Open a savings account.
Many banks offer savings accounts for children with low minimum balances that give kids the chance to familiarize themselves with banking, saving, and interest rates.
Bring your child to your local bank and open a children’s savings account with them. Explain to them the value of a savings interest rate and how it can earn money over time. Provide basic calculations of how much they can earn in a year from the interest rate in a savings account.
5. Teach kids how to comparison shop.
As children get older, involve them in comparison shopping, especially for larger items for which the savings can be significant.
As you shop for everyday purchases like groceries, show your children how to read price tags, and have them identify which brand offers the lower price. This teaches them how to do their research as a consumer, stretching their dollars and spending their money wisely.
6. Provide a good model for responsible money management.
Ultimately, kids inherit many of the spending behaviors of their parents. If you’re a big spender or are very frugal with your money, your children will notice those habits and will intuitively follow your lead.
With kids watching over your shoulder, it’s a good opportunity to be more mindful of your own words and actions and make sure you’re doing the things you would like your children to emulate.
Sticking to a budget, making wise spending decisions, and communicating the reasons behind your decisions are all ways you can instill important money lessons through your own behaviors.
Good financial literacy is an education that will benefit children throughout their lives, regardless of their income level. By teaching these concepts at an early age, you can put your children on a path to greater financial stability later in life.