RSS FeedIs there a “best time” to teach your children about money and finance? Some would say that you can’t start too early, and we agree. Obviously kids need to be old enough to count first, but once they are, it’s time to start.
Early Steps
Currency is an excellent way to teach counting and money concepts. Making pretend purchases, giving change, and delving into the components of money equivalents (10 dimes make a dollar, etc.) are all a great basis to learn math and understand how money works.
Start early with an allowance, even a very minimal one. Have discussions about how much your child can buy with their allowance, and the value of their purchase. Now is a good time to begin working on the concept of saving, and also allocating or budgeting. Let’s say your child has one dollar–he can break it up into various saving and spending categories. For example: Ten cents for church collection or donating to charity; twenty cents to save for a special purchase; ten cents to contribute to mom’s present for Mother’s Day; and the rest on whatever he wants.
Set an Example
The more your children are used to seeing you working on a budget, or carefully considering each purchase, the more likely they will use your example later in life (eventually!). Conversely, if they see you impulsively blowing your budget, and the family’s finances going wildly up and down, odds are they won’t know how to (or want to) set up their own responsible finances when they are adults.
Start explaining your purchase decisions, especially while grocery shopping, while your children are young. They’ll begin to understand about priorities and budgeting. Work through your reasoning with them (this can of beans is exactly the same as the other can of beans, but less expensive because it’s not a big brand, etc.).
How Much Should You Share?
Giving your children an awareness of the family’s financial state is good, but be careful how you do it. You want them to understand that they play a part in the family’s well-being, and how their wants and needs fit into everyone else’s. You want them to understand why they sometimes can’t have that special something they want so urgently. This can help make your family stronger, and start your kids off on the right path.
On the other hand, you do not want your child to feel the weight of adult responsibility. It’s not up to her to ensure your family’s financial welfare. You do want her to remain a child, and not have adult worries.
You also do not necessarily want to share too much information about the family’s financial matters. Exactly how much you earn is not really your children’s business—it’s private, and keeping it that way is a good lesson in privacy. And you do not want your children starting to do their own theoretical family budgets (using savings to buy a child a new car is not a decision they should make or suggest, for example).
As Your Children Get Older
As your child grows up, you can start teaching him more complex issues about money, and how he can handle it—especially if he is making his own money.
Help your child open a savings account, and eventually a checking account. Discuss how credit cards work, and even (if you are comfortable) sharing your own credit card statements, charges, and payments. You can do a credit card test-run by giving your child a reloadable prepaid debit card and help her manage it. A prepaid debit card is also good for older children to use if they purchase items online—music or books, etc.
And when she is old enough, start the discussion on choosing and paying for college.
Here are some good websites for more information about teaching your children about money:
Questions? Just stop by one of our convenient locations, and speak to one of our associates.
