Teaching kids the value of money is so important.
Take a look at the way some adults handle money and finances and it is clear that a lot of people need help!
By educating our children we can give them the benefit of our experience and help them avoid the same mistakes we made.
It is important to start these lessons early with our children.
This is backed up in a report by researchers at Cambridge University
By the age of seven years, several basic concepts relating broadly to later ‘finance’ behaviours will typically have developed.
Hey, I am not going to argue with the guys at Cambridge and to be fair it is something that makes a lot of sense to me anyway. I think it would be safe to say that our financial habits are very much formed by the time we are seven years old.
Children as young as three or four have a grasp of making choices. Helping them see that the choices they make will affect the final outcome of any given task or problem is essential. Amongst other things, this is a skill that is very important when managing our finances.
Teaching kids that waiting is something we all have to do is also a valuable lesson. This could be waiting in turn to use the slide at the playground, sharing a toy or saving our money to buy something we want.
Teaching 3-5 Year Old Kids About Money
It can be useful to teach your child to wait in a queue. A good place to do this is at the park, waiting in line for the swing or for their turn on the slide will show your child that we all have to wait for things in life. Talk to them and explain why we have to take turns and show them that waiting can very often lead to a reward.
Saving, Spending & (Attainable) Goals
Give your child a ‘savings’ and a ‘spending’ jar. Each time they receive money divide the money equally between the two jars.
When they want a treat then show them that the money in the spending jar goes down, when it’s all gone there are no more treats.
Make sure you create an attainable savings goal, attention spans in three year old children are not known for being huge. Be sure to make it something that can be met fairly quickly.
Consider matching their savings coin for coin as this will create a real incentive to save for your child (and speed up the time it takes to reach their goal).
Take the time to sit down and help your kids count the money in the jars. This is a fun activity and will help your children start to value their little pile of coins. It will even start to teach them that different coins hold different value and it is also good for practising their maths.
Remember each of these small lessons will help to form the basis of behaviour patterns regarding their attitudes to money as they get older.
Teach the Value of Money to 6-10 Year Old Children
Children between six and ten years old are ready to learn that people need to live within a budget. Teaching them that money is rarely freely given to us and usually has to be earned is important. Also the money we receive is finite which means people need to prioritize their spending.
Shopping, Budgets & Making Choices
Take your child grocery shopping. Teach them about working within a budget when you go shopping. It can often be a useful exercise to take a calculator with you. You can give your child the responsibility of the calculator and help them use it to keep on track with the budget.
Show them that you have choices at the supermarket such as do you buy a white label product or do you buy a brand name product? For a bag of rice then own brand would probably be the way to go, but for me when buying coffee I would have to go for the brand name as I can’t stand cheap coffee!
Show them that the least expensive option is not always the way to go.
Now you have taken a sizeable chunk out of your budget with my expensive coffee (thank you) you need to show your child that there is no money for a non-essential such as chocolate cake. A depressing thought I know but a valuable shopping lesson.
Another good tip is to start to get your child involved with the decision making in some small ways.
Don’t be afraid of speaking out loud . . .
Do I really need two loaves of bread or could I manage with just one?
I wonder if this bag of potatoes will be enough to feed all of us tonight or do we need the bigger more expensive bag?
We can only afford one of these . . . Dad’s coffee . . . or . . . a big chocolate cake?
Okay, maybe the third example is not such a good one. Realistically ask any six to ten year old that question you are only ever going to get one very clear and emphatic answer . . . CHOCOLATE CAKE!
Pocket Money & Chores
One final tip at this age; it is a good idea to give them a modest amount of pocket money. Encourage them to continue to save half for ‘rainy day money’ and to choose wisely how they spend the other half.
Make sure that they don’t have so much pocket money that they can stuff themselves with sweets all week and still have a saving jar bursting full of money.
For me I would also expect them to do some chores for the pocket money such as clean their shoes, make their beds or take the rubbish out. This helps reinforce that money is rarely just given it has to be earned.
11-13 Year Old – Harsh Realities
Your child is old enough now to grasp a few more of the harsh realities of life. It can be a good idea to start to share with them some aspects of your own finances.
Now I don’t mean spill your guts, but a few simple reality checks such as sight of the utility bills, food shopping budget, insurance and mortgage payments should be enough to show them that we all have essential living expenses that need to be balanced by our incomes.
Work Hard, Being Frugal & Reaching Your Goals
Create goals for your child. If you are going for a special day out then tell them they need to save some spending money.
This teaches them to pay their own way and is also a great way to teach them about being frugal.
Show them that if they want to save spending money for the special day out then to meet the target quickly it can be done by cutting back on sweets, magazines and other luxury items. This way they will be able to reach their goal much faster.
Another good lesson to reinforce here would be to offer extra pocket money for extra chores. This will again show them that money is rarely freely given and needs to be earned. By working a little harder they can quickly achieve their goals.
Spend less and earn more are the best ways to reach our goals when trying to accumulate wealth, even the small amount of wealth required for spending money on a special day out with the family.
It is also time to introduce them to bank accounts and interest rates. The easiest way to do this is to open a savings account of their own and explain in simple terms that banks pay interest rates to savers and charge interest to borrowers.
Encourage them to continue saving but instead of the ‘savings’ jar it is now time to use the bank account.
Increase Chores, Pocket Money & Pay Your Own Way
As kids get older they usually want more and more money. There is nothing wrong with this it is just a fact of life; they have more needs, wants and desires.
This is a great opportunity for you to teach your kids that working hard is the only way they will reach their goal of having more cash.
Make them sweat for it!
By giving them more chores such as washing the car, doing some gardening or some housework it enables you to give them a little more pocket money than when they were younger. They will appreciate the extra cash more because they worked for it and you have taught them that it is by working hard that they can reach new goals.
With this extra cash they are earning it is time to stretch their responsibilities slightly.
- If they break something they pay for it.
- Family birthdays and other gifts, time to pay for the gifts and cards they send with their own money now.
- Magazine subscriptions and luxuries, time to dig deep and pay their own way.
Give Them a Little Rope . . .
We can all relate to just having to have something at one time or another. Am I right?
If we look back now we probably do so with a mixture of confusion as why we thought this ‘something’ was so important and more than a little regret to those of us that managed to get hold of our ‘something’.
Okay, some of us had to go one step further and had a ‘something’ that will forever haunt our lives. I for one spent my entire savings on what I thought at the time was something truly amazing, something that I could just not live without . . .
My something was an album by Adam and the Ants called Prince Charming. I look back now with shame but at eleven years old I worked my backside off, saved for six weeks, went without my usual comic and sweets and even did extra chores to get the money together to buy the album.
I was so pleased to get the album, I probably actually wore the vinyl out (yes vinyl, remember I am an old fogey from the days before CD’s) and drove the rest of the family crazy with wails of ‘stand and deliver . . . your money or your life’.
Actually it was rather a disappointing album and even at eleven years old this fact did not elude me.
But as you can probably guess I did not admit this to anyone!
The album was a waste of money, but the lesson it taught me was invaluable. The mistake my Dad let me make taught me more than the fact that Adam and the Ants were a load of rubbish. It taught me not to fall for fashion related purchases and a fool and his money are soon parted.
Had my Dad vetoed my music choice at the time I would not have learned this tough lesson so well. But even worse, I could easily have ended up a lifetime fan of this dubious 80’s glam punk band with a dress sense to match. Thanks Dad, I am truly grateful for the lesson and for saving me from future fashion disasters!
A Little More Responsibility
Next time you go grocery shopping why not delegate just one small part to you child. Let them take full responsibility for one of your non essentials such as soft drinks. Something the whole family, especially the kids, do use but not something that is absolutely essential.
Give them the cash, explain what you usually spend it on and ask them to take over this section of the shopping. Maybe even ask them if they can find a quality alternative drink that is better value for money.
Chances are your child will take this role extremely seriously. They may do well with the task which is fantastic; however they may do ‘less well’ which actually is equally a good thing.
If they buy an expensive alternative then it is likely there will not be enough to last the week until you go shopping again. If they buy a cheap alternative it will last forever because nobody will drink it . . . including the kids. Both alternatives leave everyone thirsty and will encourage them to get it right the following week.
I am a strong believer that we learn from our mistakes. Let the kids make some mistakes but try to limit them to small mistakes.
14 -18 Years Old – Starting to Stand on Own Two Feet
Okay the kids are now teenagers, you probably only get to see them when they pass you to get to the fridge. Most of their time is spent in their rooms; conversations are restricted to the odd grunt here and there and of course you are thought of as an old fogey that has no idea about anything. Sound familiar?
Time to Get Your Own Back & Valuable Lessons
It’s time to cut some of the purse strings. This won’t be popular with the kids but believe me you are helping them and besides it will probably give you an immense feeling of satisfaction.
Your children are now old enough to get a part time job such as a paper round or a Saturday job. They no longer need the pocket money you have been giving them; it is time for them to earn their own money. Of course you will continue to feed and clothe them but any non-essentials they should be taking care of themselves.
Advertising and Consumerism
Teach them about advertising and consumerism. I don’t mean coach them to become experts but the basics such as fashion, endorsements, TV adverts, do you need something or just want it and why magazines and sweets are always placed at the supermarket checkout are just a few things that should open their eyes a little.
Many families will need to finance their children’s further education. Take a look at the cost implications of further education with your child. Examine what their options are with student loans, bursaries and scholarships.
Their spending and living expenses needs close examination no matter if they stay at home or move away. Either way they still need to eat, pay the rent and clothe themselves. Being able to live within a budget is essential, particularly when you are on a low income.
No doubt you will help them with all of these costs but they, at the very least, need to be aware of the financial strain this will put on the family. Actually I would go as far to say they should contribute financially even if it is just by working in the holidays before they start their course. Many students manage to hold down a part time job and study at the same time.
18 -21 Years Old: Young Adults Still Need Guidance
Okay, most of our children once they reach the age of eighteen will most likely strongly object to any use of the word children as after all they are all grown up now. More to the point what could we possibly teach them anyway as we are all ancient and useless?
Of course this is probably the age they need the most guidance as many of our kids start to become completely financially independent and more likely to fall into some of the common traps that our cruel world has in store for them.
Two of the biggest issues are both closely related and they are credit cards and loans.
There is nothing wrong with either of these as long as they are used responsibly. But it can be oh so tempting to live beyond our means and of course it is oh so easy to get ourselves in a whole heap of debt.
Make sure you help your kids make wise financial decisions as young adults because without caution this is the time when they can do the most damage. Hopefully the lessons they have learned from your about budgeting, making choices, being frugal, working and earning more money, interest rates and just doing without until they have saved enough will stand them in good stead.
But . . . there is no harm in a gentle reminder and a word of caution from mum or dad. Help give them the best financial start in life possible with the knowledge to be financially independent and truly debt free.