One of the most common questions that parents have is this: When do I start teaching my child about money?
Money is such an abstract concept that many children have trouble grasping the idea behind it. And, with money increasingly invisible, and transactions carried out digitally, it’s even harder for kids to understand what money is all about.
However, in order for your child to thrive, he or she needs to know how to properly manage money. Luckily, you can start teaching your children about money at a young age.
Laying the Groundwork
Most children aren’t going to “get” the idea of money until they are at least toddlers. And even then the idea of money is going to be a little difficult for your children to understand when they are two. But that doesn’t mean that you can’t begin laying the groundwork for money lessons.
One of the best ways to begin laying the groundwork is through visual representations. When my son was between two and three, we began allowing him to “earn” TV time. He received coupons, each amounting to TV time, for good behavior, using the toilet, and other desirable actions. We labeled each of his videos with numbers, reflecting how many coupons each required. My son got used to counting up his coupons, and working toward watching his favorite show.
Later, when the allowance began, he made the connection between his TV coupons and money. Now, as a 10-year-old, my son understands saving up (he recently purchased a Nintendo DS), and he created a budget for March reflecting his expected allowance, as well as extra money he planned to earn by helping with certain home business filing and shredding tasks, and the books he wanted to buy.
Deciding When to Begin
The key is identifying when your child is ready to begin learning about money. Every child is different. However, you can gauge readiness by the questions your child asks. When he or she begins wondering about how to get more toys, that’s a good place to start.
You can use visuals at first. Cash, even though you might not use it, is a good idea. Many parents like using envelopes or jars (we use jars). Charts identifying savings goals are helpful so that children can track their progress. It can also help to open a kids savings account at the local bank. No, the interest won’t be as good, but many local banks and credit unions give prizes to the kids when they reach certain levels in their accounts, and this can be a great motivator to teach them to enjoy saving.
Finally, make sure that you have financial discussions in your home. My husband and I talk about our financial plans in front of our son, and debate the merits of different uses of our money. We also make it a point to help our son comparison shop by looking at online prices as well as in-store prices (something for those who are a little older).
If your child hears your positive discussions about money, from paying down debt to saving for retirement to giving to charitable causes, he or she will be more interested at a younger age. Include your child, and this will be one of the greatest teaching tools available to you.
When do you think you should teach children about money?