How to Teach Kids about Money
How to teach kids about money? Read on. One day I accompanied a friend of mine to the shopping mall, she had her 8 year old son with her. On reaching the mall she decided to buy herself some peace and gave her son some money to buy himself an ice-cream. She explained him the math that how much the ice-cream would cost him and that he should keep the change and maybe buy a chocolate later on.
We expected to be left undisturbed for some time but alas within minutes the boy was back. He wanted more money…. he threw the ice-cream he had bought as he was unhappy with the flavor and was not sure about what happened to the change. My friend was exasperated but she gave him the money nevertheless!
Parenting issues apart I realized that the kid had no idea that money was something that was important and was not free flowing. I looked at my friend and she said that he was just a kid and after all it was a very small amount. Amount is not important it is the habit which is!
There are two important takeaways from this incident
a) making the child awareness about the basics of money and
b) saving should not be a once a week/month activity but must be inculcated as a habit.
How to teach kids about money
Here are a few pointers that can help you teach kids about money and saving money.
1. Make them Aware
As in the above example it seems that the biggest hurdle is the child’s unawareness about the basics of money. A child must be told that money is not free flowing and it is not endless; he/she must be told that there is a limited amount that we receive each month(at least most of us do) and one needs to manage with that amount.
These days with higher income and lesser number of kids parents may find it easy to fulfill the demands of their kids but it is important to remember that once in while you should say no. Try reasoning with them; you could tell them you already have remote controlled cars so you do not need another one or may be this month you have already bought a new racquet so the skates will have to wait for later.
You must also tell the child that the parents work hard for that money and it just does not grow on trees so everybody must be careful about the way they spend it. You do not have to miserly but just prudent!
2. Give them an Allowance
You can teach kids about money by giving them an allowance. This can be done once your child is a little older; giving them a fixed allowance every week or month is good way to teach them to save and prioritize. You should ensure that you give them a reasonable amount as pocket money it should not be too less or too much; you should ideally discuss this with your child before you fix it.
The key to making this work is that you explain to your child that he/she needs to make the money last the entire week/month so if he/she overspends in the beginning he/she will not be left with anything at the end of the period.
Also make sure that every time your child goes broke in the middle of the month you do not rush in to replenish his allowance. You could do that but maybe you could reduce the next month allowance.
Also give them constructive advice on what they could have done to avoid the situation. In the above example my friend could have told her son that he should have chosen the flavor of the ice-cream carefully and she should have gone back with him to the ice-cream stall to check about what happened to the change.
3. Have a Piggy Bank or Savings Account
Depending on the age of the child you could give him a piggy bank or open a savings bank account for him. Tell them to contribute regularly to the account or the piggy bank; this will help them in making saving a habit.
For the account you could show them a statement of their money growing and for the piggy bank you could just lift it to show them how heavy it is getting.
Occasionally you could also make a contribution to their kitty. Giving them a sense of ownership is a big boost too; a cheque book with your child’s name printed on it will give him/her a lot of kick. Most banks have attractive schemes for children’s account with colorful cards and cheque books and low minimum balance requirement.
4. Encourage them to Save
It is important that you encourage and not force your child to save. Give them a rationale why they should do it and show them what they could do with the saved pennies. You could say things like “with your saved money you can buy the new Barbie set for yourself” or you could say “you can buy grandma a surprise gift on her birthday”. Having a concrete plan will give them a sense of direction.
A piece of advice: On grandma’s birthday if the money is less or the child is little short of money for buying the doll set please do loosen your purse strings.
5. Be a Role Model
Wondering how to teach kids about money? Why not be a role model. Kids learn from their parents so you should walk the talk; when you go the mall you could refrain buying mindlessly.
Try telling them that though you love the pair of shoes but you will not buy them because you already have something similar or you could compare two bottles of the dishwasher and choose the bigger one as it proves to be cheaper in the long run.
6. Choose an Age Appropriate Plan
Make sure that you do not overwhelm your child with the idea of saving. The plan should be in sync with his/her age and should progress as the child grows older.
Start with a piggy bank, as they grow let them visit a bank with you and let them have their own savings account, a few years down the line let them withdraw money from their account up to a limit.
Asking a teenager to help you with your household expenses is a good idea. As they grow older they will want more freedom in their spending so let them have their space.
Conclusion – How to teach kids about money
To conclude I would like to say that saving is good but make sure that your child does not become so focused on saving that he/she forgets to enjoy his allowance. Also what they want to do with their savings should be left with them even if it appears to be irrational to you.
After all they are kids and they have all the right to be unreasonable and also make sure you do not come too harsh on them on this saving thing. Let kids be kids! Hopefully this tip on “How to teach kids about money” is put to practical use.