Teaching Kids about Money – A Comprehensive Guide

School teaches kids many of the skills they’ll need to be successful as adults. But one area where formal education woefully fails children is in matters of money and finance. Sadly, the educational system isn’t equipped for teaching kids about money. Therefore, it’s up to parents or other guardians to educate children on how to be responsible financially.

The good news is that the techniques that can set kids on the road to financial independence and good practices are only a few. Using these methods, you can show children the right way to think about and handle money. These lessons will be something that will help them in both the short and long terms.

boy with round eye glasses studying a booklet in bedroom

How to Teach Kids about Money

The most important thing to consider when teaching kids about money is making the lesson something that they can understand. On top of that, they should be familiar with the presented concepts. Getting overly complicated or teaching a lesson that doesn’t immediately apply to their situation is only going to confuse them.

These financial lessons need to be things that connect with them as kids, while still teaching a lesson that applies to money and finance in the adult world. The perfect type of lesson finds a way to bridge that gap as something that is relevant in both the world of a child and the world of an adult.

Most of the time, the best person to teach these lessons will be a parent or a guardian who is interacting with the child on an everyday basis face to face or even via the Internet. That’s ideal because it allows the teacher to follow up with the child frequently and confirm that the lesson is setting in.

Finally, it’s practically never too early to start teaching kids about money. While we may not want to acknowledge it all the time, money is the primary means of interaction with most of our worlds. A child should be familiar with money and comfortable with good financial practices from a young age.

The Top 5 Ways for Teaching Kids About Money

1) Save Money

golden piggy bank

This one may seem simple, but it’s tremendously important as kids are familiar with only short-term concepts. They want ice cream, and they want it now, not later.  Make sure your child sees you saving money and understands that having savings is a desirable thing. This one can be implemented at a very young age.

Especially for younger children, a great visual technique is to use a glass jar to save bills and coins. The child can actually see the money accumulate. Often times that’s a good way to imprint the idea of long term benefits in a young child.

2) State the Prices of Things

Another tip that can be used with young children is to state the prices of the things you’re buying. When you’re out shopping at a store if you’re going to buy something, tell your child what it costs. This familiarizes a young child with the concept that things cost money, and gives them a scale of what certain things cost in relation to other items.

By instilling the idea that goods and services cost money at a young age, you give your child a head start in understanding financial matters.

3) Avoid Offering an Allowance

transparent money bowl next to paper with financial situation

Avoid the idea of giving your kid a certain amount of money each week simply for existing. Instead, pay your kid explicitly for completing certain chores. Mow the lawn? $5. Vacuum the house? $7. And so on.

From a young age, your child should understand the concept that money comes from work and not as a default. While your child may complain at the time if other of their friends receive an allowance without having to do any chores, your child will be in a better position as a teenager and adult.

4) Establish a Bank Account

One of the most important things you can teach your child is how to manage money in the banking world. As an adult, he or she will have to deal with money management in more complicated ways. However, a bank account is a foundation that should come as second nature.

You can start early with a simple savings account. Show your child how to open such an account and how to deposit and withdraw. Teach him or her how to check the balance of the account and monitor the balance over time. This is going to give a solid body of knowledge in the financial domain to your child that will make money management easier in the future.

5) Help Your Kid Get a Job

office furniture with office chairs, apple computers

This one should be a no-brainer, but a surprisingly large number of teenagers avoid getting any job at all. A part-time job as a teenager is a critical way to instill good financial mindset at a young age. If a kid works, he or she gets a picture of what the world is like for most adults on a smaller level.

And having a job gives a child access to money that they earn on their own. This is a very different story than the money they get for birthdays or is given to them. Gaining the sense of what earned money is like and what they choose to do with it gives them a taste of adulthood.

To Sum It Up

These techniques and lessons will prepare children to use money responsibly and be comfortable with sound financial practices. Teaching kids about money in these ways will set them up to be successful with their finances as adults which is a tremendous advantage.

We strongly encourage you to use some of these techniques for teaching kids about money with your own offspring and let us know how it’s working out. And if you have some other lessons or tips you’ve used with your children in the past, let us know in the comments.

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