Money Lessons You Can Teach Young Children

June 18, 2015

Money Lessons You Can Teach Young Children

Financial skills are imperative in our everyday lives. Just like a habit, it is difficult to have a head start especially if you are not used to it. In the most trying financial times, it is important you teach children the value of money and also the importance of spending money wisely. Instilling good money habits will help them in the future and create a positive impact in their life later on and can later be passed on to their kids and their kids and so on.

Here are just some tips or ways that you can apply to teach your little ones great money lessons:

Ages 3 to 5

Go to the store “just to look” –

Sometimes, children do not have a grasp of financial matters. They have this notion that when you go to a store, it means that you are going to buy something. But you can create an activity of going to the store just to look. This can teach them that it is okay to leave a store empty handed. What it also teaches them is prioritizing their wants and gathers product knowledge so they can decide what they really want to spend their money on.

Learn the importance of waiting –

When your child is waiting in line, discuss how important it is to learn to wait for what he or she wants. Being patient waiting for something that he or she wants will help them to realize the importance of this virtue.

Create three jars and label them as “spending,” “sharing” and “saving” –

Every time your child receives money, for example, from doing chores, from a birthday, etc., divide the money equally among the jars. Money in the spending jar can be used to make small purchases like candies, stickers, etc. Money in the sharing jar can be used for a cause or to someone who needs it. While the saving jar is for longer terms items such as their first car. Try to match their monthly savings and see their interest increase. This will give them a visual understanding of the value of an employer matched 401(k) plan.

Ages 6 to 10

Discuss financial decisions –

It is important to include your child in some financial decisions, such as explaining to them why you chose to buy a generic apple juice rather than the brand name that costs 50 cents less but tastes the same. Or discuss deals such as it is cheaper to buy paper towels in bulk rather than the per-item price.

Give them the experience of making choices with money –

In a grocery store, give them money like $2 and have them make choices about what fruit to buy within the parameters of what you need. This will give them the feel and experience of making a choice on their own and spending money wisely.

Ages 11 to 13

Specify numbers –

Abstract explanation can be quite difficult to comprehend/ digest which is why providing them with specific numbers will give them a more visual representation of how it is. For example, you can explain that if you set aside $100 every year starting at age 14, he or she can have $23,000 by age 65, compared to starting at age 35, savings can only add up to $7,000.

Opportunity costs –

These are what you can also call trade offs, such as the things that you are giving up to save money. For example, kids these days are trying not to save and not thinking about their long-term goals. Have your kid set a goal long-term for something more expensive than what they have been saving for. For example, if your child has a habit of spending his/ her money every day on snacks, they may rather decide on saving her money for something bigger like an iPad.

Why is it important to teach them money or financial decisions? Good financial skills are as important to navigating life. Money or mortgage crisis has happened because some adults do not understand or don’t know much about money. This will help the next generation by teaching children these important lessons. It is more of a treasure of knowledge that can be used and help them survive.

Sources:

http://www.forbes.com/sites/laurashin/2013/10/15/the-5-most-important-money-lessons-to-teach-your-kids/2/

http://ebriefme.org/Response/HtmlTemplateLongVersion.aspx?d=515&r=lujg0Zck2UqqClu-JSvumg#THREE