How to Teach a Young Child the Value of Money

The number of young adults claiming bankruptcy (in addition to poor credit card use) indicates that many children today are not being taught how to handle money responsibly. A "have now, pay later" attitude is getting a lot of people deeper in debt. That's why it is never too early to begin teaching children the value of money. Parents should start teaching their youngsters about money as early as the preschool years in order to begin nurturing financial responsibility.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Pencil
• Small notebook

1. When your little one asks for something when you go shopping, explain that you must pay for it. Help him to understand early on that nothing is for free.
2. Give your child an allowance, starting when she is very young. However, explain that she must earn her allowance. Even a toddler can do simple chores in return for a small allowance. Make certain that your child understands that if her chores are not completed, she will receive no allowance that week. Likewise, increase the amount of her allowance as she gets older and becomes more responsible
3. Work with your child in setting goals. Help him to understand how many weeks’ allowances it will take to buy that new bicycle he wants. If he must earn the money for something special he wants, it will mean more to him.
4. You can begin teaching children the concept of saving money from the moment they put their first coins in a piggy bank. It is important for a child to understand that only part of her allowance is for spending while another portion of it must be saved. You may want to add an extra incentive for your child to save money by offering to match however much money she saves within a specified length of time.
5. Discourage your child from making impulse purchases, even if he has saved his own money. Ask him to wait just a week, and then see if he still wants to buy the item. More times than not, he will have forgotten about it by week’s end. This will help to teach him the difference between those things that he wants and those things, which he really needs.
6. Show your child how to budget her money within her allowance. Once a child is old enough to write, encourage her to track her money by recording all the money that she spends each week in a small notebook. Explain how she should deduct each of her expenses from the allowance she received that week, carrying over any remaining balance to the next week. This will help to prepare her for balancing a checkbook later on in life.

Tips & Warnings

• Be a good role model and practice what you preach! Children do not learn good money management skills on their own. They must be taught. And if you aren’t careful about how you spend your money, your child probably will not be a careful spender either.
• Bad credit habits later in life not only may prevent you from buying a house or a car, it can keep you from getting hired for certain jobs, or even from being able to rent an apartment.