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How to Teach Children about Money

By Edited Aug 19, 2016 6 11

Children and Money Management

Many parents are in a dilemma when it comes to making decisions about how to teach their children about money. Questions of how to start the topic, where to start, which channels to use and how to measure progress, disturb many parents. Some think it is a rich people's affair.

Failing to teach kids the value of money has led to conflicts between parents and their children. This is due to so many pressures that work against your values, especially from advertising by music companies, mobile phones, beverages industry and even toy makers. I am certain you've asked yourself ' how much pocket-money should my kid get', causing conflict not only between you and the child, but also between your spouse.

However, the real problem is how to teach a child to save. As a parent, you should take time to teach your kid about money regardless of income,

Children and Money Management
and it should start when he or she is young. Procrastination is the worst threat to the financial literacy of your child. Teaching your child about money is more than preparing them for employment or teaching them to save some of the money they earn. when teaching your child about money, think in their terms, not yours as an adult.

For example, your child may ask you how much you money you make. More often than not adults do not open up to their kids and instead shout at them with comments like, 'money does not grow on trees', 'love of money is the root of all evils', or 'rich people are greedy'. These comments and notions just paint a bad picture in the mind of a child. Any time money is earned, moved, donated, shared, borrowed or saved provides an opportunity for you to teach your child how the money world works and how to make money decisions.

Pocket Money

The most common source of money for children is pocket-money, either as gifts or by earning it. In my opinion, there is no right or wrong way to offer children money and how much depends on each family's unique financial situation.

At times, you may feel pressured by your kid into giving an allowance because his friends are receiving more. This is why as a parent you are advised to include children in discussions of family financial problems. You may be quite surprised at how supportive and helpful children can be during these times. But do not give too much money, it makes them think they are financially fit, which in turn makes them spend more. Remember, the more money 'adult' children receive, the less money they accumulate, while those given fewer dollars accumulate more. Don't make the mistake of thinking your wealth can automatically transform your children into economically productive adult.

Discipline and initiative cannot be bought since once he starts getting money without doing anything, he or she will have no motive to work hard for it. If a child does not know, especially where money comes from, they are likely to put crazy demands on their parents. When their minds are moulded good money management principles, they are likely to grow into financially responsible adults.

Teaching Kids about Money

The lessons should focus on the concepts of earning, spending, saving, borrowing and sharing. Begin with the first three concepts when children can talk in sentences. Kids need to be a little older to understand the concepts of borrowing and sharing. A good way for your child to learn to manage money is with a set of pocket-money that he or she must live within. Start the allowance early at age six or seven, or as soon as the child begins to read or take an intelligent interest in money, but keep it small at first.

Be certain the child understands the amount, what expenses it has to cover and how often money will be given. You need to know that mistakes are set to happen anytime. the good thing is when the children do them early, it's you chance as a parent to point out the consequences and give guidance on what should have been done right.

Teaching your children about money, as well as credit cards, can be easy, and even fun experience, but most importantly a valuable lesson.

How to Teach Children about Money

For example, money savvy pig is a new form of piggy bank that is transparent and money slots are open. Unlike other piggy banks that are opaque and locked. The idea of making it transparent is to deal with the child's gratification and to make them understand why they should save or invest that money, instead of denying them access without explanation. It also gives a child a sense of control, which leads to a sense of security. This is because, at adulthood they will have full access to their bank accounts with an ATM.

The most important thing to teach your children is that money saved is well invested. Each lesson at a certain age moulds your child's mind with about money. Here are some goals you can set for the different age groups to make sure your children receive one of the most powerful forces of life, money control skills:

Goals for Kids age six to 10: It is time to start learning the realities of money and master certain basic money concepts:

  • Identify money: make sure they know the difference between a penny, a nickel, a quarter and a dollar coin and notes as well.
  • Making change: Make sure that they know how to present enough money while buying and to count change.
  • Being responsible for money: If she or he loses the coin, do not replace it. It will teach them to be more careful in carrying money.
  • Understand the things cost money: From the sweets they must know that nothing comes free.

Goals for kids age 11 to 13: As your child gets older, their responsibilities when it comes to money should increase and your expectations of their money skills:

  • Setting up a savings plan: As they age, they better able to set goals that are far-reaching
  • Savings account: The old piggy bank may have been okay earlier, but once his savings grow, it's time to bank it in a commercial institution. Now many banks have such tailor-made savings account.
  • Giving to charity: Even if it is only a little money, it is about time to learn about giving to worthy causes.
  • Shopping wisely: Children this age may spend time out at the malls ans supermarkets on their own; they need to know about shopping for value.

Goals for youths age 14 to 18: By this age, you want them to have a firm grasp of certain money essentials because it may be only a matter of a few years or even month before they are out of your watch:

  • Getting a job: Nothing teaches about the value of a dollar as fast as working for it.
  • Understanding what a budget is all about: they should know how to make a budget and allocate the money to the needs.
  • Saving for college: College is an investment worth making and for this age group, it's just around the corner.
  • Learning about investment: It is important that they understand at this age how investments differ and what investing in general can do for them.
  • Learning about credit and debt: It is never too early to learn the dangers of having too much debt and how that can happen.
  • Understanding taxes: at some point, whether while buying or earning they will have to pay tax.


Sep 28, 2011 3:27pm
Nice article. That piggy bank is a great idea.
Oct 27, 2011 1:58am
As they say, better start early.
Oct 27, 2011 7:45pm
Helpful article. If more parents would teach their children about how to manage money there would be a lot less debt and poverty in the world.
Oct 28, 2011 12:17am
Excellent article. I think that pig with the different compartments is a genius idea.
Oct 30, 2011 9:42am
Nice job on the article! You made many helpful points, and I appreciate the age breakdown.
Oct 31, 2011 8:56am
Great article! Lots of good ideas here. One of the things I did that really made an impression on my home schooled kids, was to give them a fake checkbook and account and a fake part time job. We condensed a week's worth of living into each day of this simple economics class, by covering all expenses necessary for that week, just as if they were truly living off their wages. Each day was a new paycheck for that week. They quickly learned that a minimum wage job was not going to support them. It got them to thinking about what it was they really needed to do - either earn a degree or a trade skill.
Nov 1, 2011 11:34am
Hi ClassicTechy,

All I can say is I'm saving this article in my personal folder awaiting my 4year old kid to make at least six. Its a wonderful article.

Nov 2, 2011 1:38am
@ Aurora, Mockingbird, Marcel: True, the piggy bank is way snazzy and functional than the traditional route.

@ Jade, Nowadays most parents are concerned abt putting food on the table, not realizing that teaching money matters to their kids is also essential.

@ DLTheo, your welcome. The age breakdown ensures the importance to star early teaching your child abt money matters.

@ ClassicTech, Kigozi: For sure, I'll also employ your method. It certainly makes the notion 'think outside the box' a reality.
Nov 8, 2011 10:15am
Wonderful article. I especially like the goals that you gave.
Jul 25, 2012 12:53pm
Great article and your goals are superb--I was born in extremely poor circustances but into a loving family. Nevertheless, I never was given instructions about money--I endured a lot of hardship in my younger days because of this. And so--thoughtful, helpful article 5 Stars from me!
Jul 5, 2013 4:39am
Excellent article, and very important too. I know plenty of people who are terrible with money purely because they were never taught to respect it when they were younger.
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