One of the most important lessons that parents can teach their children is what money is and how to deal with it. It is possible, and a good idea, to start from as early an age as practicable so that kids understand what monetary transactions involve. They also have to be taught that money just doesn’t grow on trees and has to be earned. As their knowledge grows, and they learn about how to obtain money of their own and what can be done with it, they will quickly realize it is a central part of daily life, and if parental teaching is good they will develop saving habits that will last a lifetime.
Starting the teaching process
Young children love to play, and learning through play is an important part of development in the early years. Introducing play money into games is a great place to start, especially as it brings in elements of math. It doesn’t have to be complicated and parents can make up their own games to help their children explore the concepts. Try playing a card game like Pairs and each time a matching pair is found hand out a financial reward. At the end of the game the player with the most money is the winner.
As they get older, games like Monopoly are ideal to develop their understanding of the transactional process as well as having a lot of fun.
Introducing real money
There is no reason not to introduce real money at an early stage, especially if the child has grasped the basics of what it is for. Starting the saving process by giving kids a fun piggybank and a small allowance, and explaining that saving for something that is really desired is a good thing to do, establishes the saving habit. Of course, children should be given the option of spending the money saved on other things, but equally they need to be taught that there are consequences if they find they don’t have enough to buy what they had originally wanted. The key here is not to buy it for them. They made the choice; they have to live with it. It’s a good lesson to learn early on in life.
Saving for the future
As children get older they are able to take more and more control over their money. Many kids start to earn by doing chores, either in the home or for other people. Washing cars, cutting grass, doing a paper route, all are useful ways to instill a work ethic for reward. This is when opening a savings account is really useful. Kids feel grown up when they go to a bank or open an online account, and understanding how to open a certificate of deposit account or a tax free saving scheme gives a sense of being in control of their own finances. By this stage the importance of saving money for something really important in the future should be a natural part of how kids think, and a certificate of deposit is a great way to get them started. That first car is expensive, and going away to college needs a lot of money too. Children are quite capable of setting themselves goals, and when parents encourage this they are helping to validate the choices their children make.