5 Ways To Teach Your Children About Money
A few weeks ago, I downloaded an app which allows your kiddos to play ‘shop’. You print and cut out the items to stock their supermarket and the app allows them to scan the barcodes and ‘charge’ customers for each item. We’ve had a lot of fun with it, and it got me thinking about how important it is to teach children about money from an early age.
After a bit of research, I discovered that ‘early’ is no exaggeration. A study carried out at Cambridge University found that money habits are formed by age seven, with researchers agreeing you can start teaching financial basics from just three years old.
Children pick up money habits quickly, so it’s important to point them the right direction. These are some of my favourite tried-and-tested family money tips.
Start With The Basics
My parents have a stash of old coins which their grandchildren love playing with. When my eldest son was small, he’d often ask Granny or Grandad ‘how much is this one?’. It made me realise he’d already grasped the concept of coins being worth different amounts. I took the chance to talk to him about currency, and we sorted the coins from my wallet into piles, so he could see they were different sizes and colours. It was a useful first step in teaching him about money and how it works. He also liked handing over money in shops, especially when it meant the cashier gave him change. He didn’t always get the amounts right, of course, but it was a great way to establish the concept of exchanging money for goods.
Create Money Jars
Children don’t need a piggy bank to start saving. Empty glass jars are free (bonus!) and the fact kiddos can see their money building up inside as they add notes or coins helps instil the idea of watching it grow. Once they’ve grasped the basic concept, set up a system of three jars.
Spending | This one is for things they want to buy – sweets, magazines, small toys – so they can use their own money for these.
Saving | I’ll go into this in more detail later, but this one is for them to build a reserve of money, whether they have a specific plan for it, or just as ‘rainy day’ funds.
Giving | This one is for them to learn about donating to causes or buying gifts. You might decide to do a little of each with the money in this jar. When you talk about donating, let them think about what sort of things are important to them. It could be people who’ve suffered a natural disaster, children in hospital, animals in need – it’s a great opportunity for them to think about their values and how they can make a difference.
Tip: If you still like the idea of piggy banks, you can now buy transparent ones? They’re more expensive than jars, but that’s one for your own financial conscience to wrestle with.
Add Some Funds
Where do your children get their money? If they’re anything like ours, generous relatives often gift it to them for Christmas and birthdays, which is a good place to start. We also give them a weekly pocket money allowance, which helps teach a certain amount of financial responsibility. This means that instead of asking if they can have sweets or crisps on the way home from school, they get to decide if they can afford them – if that’s how they want to spend their pocket money this week. When they’re older, we’ll be offering them the chance to do chores in order to earn money. These will obviously be age appropriate, but could include things like doing the washing up, sorting the laundry, weeding the garden and washing the car. All those tasks you least enjoy? You get to pay someone else to do them, and call it a teaching opportunity. Win-win!
Let your children use their spending money to buy whatever they want in shops. This sounds obvious, but it’s a different experience to having parents buy them the things they want, and will develop as they grow older. Allowing them to work out their purchases can help them to learn the basics of budgeting. Will they use all of their money on one item, buy a few smaller things or save some cash for later? A trip to the local toy store also gives you the chance to discuss comparison shopping. Point out different prices on similar items, and teach your children about finding inexpensive options or maybe selecting a higher-priced item if it’s better quality and will last longer.
Setting Goals And Saving Up
Help your child set a money goal if they want to buy a special toy, book or other item. As well as being a useful way to teach patience, this also provides an object lesson in saving money. Talk about how they’ll reach the goal – maybe saving their pocket money instead of spending it, setting aside birthday or Christmas money, or doing extra chores around the house to earn money.
It’s important to set realistic goals, so children will be motivated to stick to the savings plan. If you know they’re likely to lose interest, encourage them to set a smaller, less expensive goal. Using the jar system, they’ll be able to see the money as it grows, but you could also try a savings chart. For instance, if the child’s goal is to save £5, draw ten 50p shapes on a piece of paper (trace around a real one – no artistic genius needed here), and have them colour one in every time they’ve saved another 50 pence. When all ten are coloured in, they’ve reached their goal.