By Sarah Lyons
“Money doesn’t grow on trees.”
“Another day, another dollar.”
“You get what you pay for.”
“Money makes the world go ‘round.”
These common sayings represent good lessons about money but can be confusing for kids. It’s important to teach our kids the value of money, how to save, spend wisely, and practice financial responsibility. Simply saying “We have to pinch our pennies.” or “That costs an arm and a leg.” is not going to help them truly understand these complicated concepts. Here are some simple but important lessons to teach kids of any age about money.
Money has to be earned
Earning money is hard work but this concept can be difficult to understand for children. You can start teaching your child about how money is earned by paying them for assigned chores. Some families may find that giving an allowance helps children understand the concept of earning a “paycheck” or allowance while other families may assign a dollar amount for specific chores. Either way, you are showing your child that money is earned. “My kids have been getting an allowance since they were 4 years old.” said Sarah Brandt, Lee’s Summit mom of three. “I rarely buy extras, like toys and treats. All of that comes from their allowance. They budget and save better than I do.”
“Starting in first grade, we give ½ their age per week for allowance and allocate 10% for giving, 10% to save, and 80% to use as they wish.” said Joy Alsup, Olathe mom of four. “This frees me to say no to little things like candy or going places with friends because they can use their own money. They have a choice and can ‘suffer’ going without if they have spent it all.” Alsup shared that after they start their first job they save 50% of each paycheck to give them a good start for spending money in college.
Candice Zimmers, Olathe mom of three does something similar. “Any money that our children earn or receive is divided into 4 categories. Tithe 10%, family tax 10%, any amount they choose for savings, and the rest is money to spend or donate. We feel this gives them a sense of how to allocate their funds and has them realize that not all that they earn will be theirs when they receive a paycheck.” Every family will have different categories for savings, spending, and other categories, the main goal is to help your child understand how to budget and save while giving them choices on how they spend their money. If they make a poor choice to spend all they have earned, they are forced to face the consequences. This lesson is best learned when the stakes are lower, at a young age, than as an adult when the consequences can be life-altering.
Developing realistic view of how much things cost
It is hard for kids to understand the value of money when they do not have a realistic understanding of how much things cost. While running errands with your child, show them how much it costs to fill the car with gas, how much the grocery bill is, and how to compare prices while shopping. Give your child $20 in cash and ask them to purchase the family lunch at the grocery store. This is a simple lesson that helps them understand the cost of living. “I put the kids in charge of the family eating out money,” said Brandt. “You want to eat at McDonald’s tonight? Cool, but that means no pizza this weekend.” These comparisons and trade-offs give your child valuable lessons in the value of the dollar.
Investing, saving and how banking works is a great lesson to teach kids. For preschool age children, have your kids place money in a glass jar. This gives them a visual of the money they are earning and they can watch it grow. Older kids may benefit from opening a bank account. “I opened a checking and savings account for my 11 year old.” said Michelle Lyons, mom of three from Lavista, NE. “I asked for a check register so she can learn how to balance her account. I also got her a stack of deposit slips to learn how to do that as well. I explained to her the importance of not telling people her pin, how to shut off her card if it is misplaced, and the importance of saving.” Warn your kids about the dangers of credit card debt. The credit limit is often far higher than a young adult can handle and the ease of swiping a card to pay for items they want or need is tempting. Interest rates are high and the debt can quickly stack up. Talk with your teens and young adults about credit cards before they make mistakes that can cause problems long term.
The best way you can teach your child about money is to give them real life experiences, allow them to start making decisions on their own at a young age, and to lead by example. If you are a spender and buy items on impulse, they may develop these bad habits as well. If you are a saver and keep a careful budget, your kids will likely develop these healthy habits. If you and your partner often fight about money, this could cause your child to view money discussions in a negative context. Try to remain positive and help them understand that money is not always an enjoyable topic to talk about but it is important and can help develop security and independence in the future.
Sarah Lyons is a freelance writer and mom of six kids including triplets. She enjoys reading, writing, and spending time outdoors with her family.
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