When I mentioned money to my 5 year old (in the context of how I didn’t have enough funds on hand to buy him a certain toy), he said, “Can’t you just go to the bank and get more?” At that moment, I realised, with a chuckle, this may be the right time to teach my child about money, how it’s earned, and how it should be managed. But how does one go about teaching children such a complicated subject?
Well, it’s not the easiest thing to approach, but managing money can be taught in small steps. Below are 5 tips.
- Children from the age of 5 (or maybe even younger) can incorporate the concept of money into their play. You’ve seen the fake bank notes and plastic or wooden coins fashioned for kids, right? Those are a great place to start. You can enact pretend play scenarios where you “sell” some objects you already have at home for “money”. Kids will get a sense of what’s perceived to be more “valuable”, which would “cost” more. My son also loved putting coins in a slotted piggy bank; it was great for fine tuning his motor skills, coordination, and counting ability.
- Eventually, you can more deeply instill a sense of the value of money. Explain that people work to make money, and the bank is a place that keeps it safe and helps it grow (skepticism aside, please!).
- At the same time, you can teach earning, budgeting and saving in simple terms. First, give them some simple chores like making their beds each morning, helping set the dinner table or cleaning the dishes, sorting laundry, etc. in exchange for a small allowance. Explain that they can set aside amounts for different things like sweets, toys, charity, savings, etc., based on your family’s priorities and values. You can also have them allocate their allowance into several jars so they have a visual representation of the budgeting process.
- Recognise that it’s hard for kids to set priorities, so sit down together and make a wish list of the things they want to do with their money. Help them rank the items by discussing what’s important about each item on the list.
- However, don’t try to dissuade your kids from initially blowing all their money on one thing, like a toy, that they insist on buying. Make such situations a learning opportunity — if they spend their allowance on X, and find they want Y later on, explain the consequence of overspending or impulse buying, which goes hand in hand with teaching delayed gratification. There’s definitely some value in this sort of firsthand experience; let them learn by their mistakes.
If you have time and patience, you can show by example, too. Before going shopping at the supermarket, make a budget and plan your purchases, with an approximate price for each item. If you shop online, plan on how much you want to spend and get the kids involved in keeping track of the cost of the items you want to buy, maybe with a simple calculator.
Also, they will begin to see that everything costs money — and some options, such as generic branded products or locally produced goods, cost less. Compare costs and try to stretch the budget, which children can also do with their allowances.
I hope these tips help in building the foundation for your child’s money management skills. Once they’re young teenagers, it may be time to trust them with their own bank account and ATM card, where they can put what they have learned into practice (with safeguards and limits in places, of course) in their daily lives.