03 Aug 6 Early Money Lessons for Kids

Money management is an area where many adults struggle. Lack of savings, reliance on credit cards, and inattention to financial details are costly mistakes. When parents think about how they can encourage their children to lead better lives, financial education is an important part of this picture.

Ideally, you should teach your children the basics of managing money while they are young. Financial education can be fun for your children and can encourage them to manage their own money more responsibly as they grow older. Here are 6 early money lessons for kids that educate while they entertain.

1. Understand Wants vs. Needs

Even a preschooler can learn to tell the difference between wants and needs. Needs include food, shelter, and clothing. Wants are everything from new toys to family vacations. When a child has a list of things he or she wants, encourage them to think about whether the item is a necessity.

2. Let Kids Make Mistakes

As parents, our instinct is to protect children from the consequences of their mistakes, but it’s important to let them make financial mistakes with their own money. For example, if a child receives a gift of money for a birthday or holiday, don’t immediately step in when they plan an unwise purchase. Regretting the purchase will make them think about taking the time to spend appropriately the next time they receive a gift.

3. Encourage Saving for a Special Item

When a child does want to make a larger purchase with his or her own money, encourage them to save for it. Teach them the importance of long-term planning. When they come to you with a large request like a new bicycle, research the purchase together. Find the best deal and create a savings plan. Children can supplement their allowance money with funds earned by doing special chores like helping take care of Grandma’s lawn.

4. Make a Special Piggy Bank

A good rule for children to follow when apportioning their own money is to put a third in savings, a third in donations, and a third to spend as the child wants. Make or buy a three-part piggy bank to make this easy. This can be as simple as labeling three jars or as elaborate as an electronic bank. When a child can see her savings building up, it brings a sense of accomplishment.

Talk to the child about the causes that interest him the most, and help him make the donation. This will give the child a good feeling about helping the community.

4. Encourage Responsibility with Chores

It’s essential that every child understands that everyone in the house needs to help contribute to chores. A sense of personal responsibility is one of the most important things children learn while they are at home.

Parents’ opinions differ on whether children should be given an allowance without any chores tied to it, or whether allowance should be earned bit by bit and paid only when chores have been completed. Other parents believe that children should not be paid to do chores that are essential to keep the house running. Many parents choose to do a hybrid system, where a child is not paid for her basic responsibilities around the house but can receive pay for larger or more difficult chores.

5. Play Games with Money

One of the most entertaining ways to teach children about money is to play a board game like Life or Monopoly. In these games, children learn about the basic responsibilities of adulthood and learn to budget their money. As long as a parent is nearby to make sure the rules of the game are followed, these games can be educational and fun.

6. Learn to Shop on a Budget

A valuable lesson for a child is to learn to stick to a budget. Make a trip to the grocery store or the discount store and give the child a set amount of money that you can spend. Make the list together and divide it into needs and wants. This can be an eye-opener for children who believe that their parents can always buy anything they want or need.

Final Thoughts

Teaching kids about money doesn’t have to be complicated. Work it into daily life and make it fun. Talking openly about money will help children learn to manage it better as they grow older.