Teaching Kids About Money: Age-Wise Tips

Teaching Kids About Money

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Teaching About Money For:

Money is not everything in life. Or so we were told by our parents.

And they were right. Money is not the be-all and end-all of our life, but it is an essential resource we cannot live without. Education gives your children the credentials and the skills that they need to earn money, but it does not always teach them how to manage money. But as a parent, you need to teach your kids about money and how to manage it to make life simpler and less stressful. Here, MomJunction shares tips and tricks for teaching kids about money.

How To Teach Kids About Money?

Teaching kids about money is easier when you keep in mind their age and pick money or financial concepts that they can comprehend at their level. Let’s begin with simple money lessons for younger kids aged three to five.

Kids aged 3-5

Little kids are oblivious to the use of money for day-to-day survival. To them, mommy and daddy are magicians who get whatever they ask for. So, it is important that you slowly and subtly introduce the concept of money to them. The best way to teach preschoolers and young kids about money is through play.

[ Read: Teaching Kids Responsibility ]

When your little one plays an imaginary restaurant or goes on an imaginary shopping spree, you can step in and introduce the concept of money, and selling and buying. Once they get used to the idea, they’ll be more than happy to pay their bills with pretend money.

Start with simple lessons – spend, save and share from the limited allowances they get.

  • Buy them a portioned piggy bank or simply get three jars and label them ‘Spend,’ ‘Save’ and ‘Share’.
  • Tell your kids to portion their allowances in the three jars.
  • The money in ‘Spend’ jar can be used anytime to buy stickers, small toys or such immediate products.
  • The money in the ‘Save’ jar can be saved up to buy something later, like an expensive toy or some goodies.
  • The ‘Sharing’ jar is an important one in money education. The money in this jar must be set aside for others, a charity, a family member or a friend in need or donate for a cause.

This lesson teaches them that money is not just to spend or save. And that it should not be used only on ourselves.

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Kids aged 6-8

At this age, kids know that they need money to buy products and services. This is also the age when they start their monthly allowance or pocket money, and they need a place to store it.

  • You can get them a piggy bank or a jar to save their money, but an occasional trip to the bank could also be a great way to introduce them to financial management.
  • A great way to teach kids about banking is to help them open their own savings bank account to learn more about deposits, withdrawals and also of interest.
  • Make learning interactive by involving them in budgeting for groceries or Christmas gifts or even a party. This can teach kids to prioritize their expenses, how to stay within budget by making certain choices and adjustments in the plans.
  • Help the child keep track of how much money there is in his or her account by helping them make a note of the deposits and the withdrawals, if any. If they only have a piggy bank, ask the kid to maintain a record of how much money goes in and how much comes out and for what.

Also, remember that the kids watch and learn, so be careful how you spend your money if you want to set a good example for them.

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[ Read: Ways To Motivate Children ]

Kids aged 9-12

Older kids understand logic and can compare two things and pick what is better.

  • This is when you teach them about comparison shopping – comparing two similar products to pick what is best. This is also the age when they can learn how to spend money wisely.
  • Teach them about opportunity cost, which is telling them that if they want to buy a pair of shoes, they will not have enough money for a video game or dress. So, they have to make their choices wisely.
  • Tell them that money once spent has to be earned through hard work and patience. That way you can weaken their temptation to spend the saved money for something trivial, on a whim or to impress their friends.

Value of money is something that a child will truly understand through experience as a grownup. In the meantime, here are a few games that you can use to teach your pre-tweens about the worth of money.

  1. The much-loved game of Monopoly, a staple across generations, has all the elements of financial decision-making.
  1. Game of Life is more than just about money. It is about making career choices, relationships, successes and change in life that affects how you manage your money.
  1. Payday, which teaches kids about earning money, paying bills, borrowing and lending money, interest, and other financial aspects of money management that one experiences every month.
  1. Moneywise Kids can be used to teach kids about budgeting and planning expenses to avoid debt.

You could also try games such as Easy Money, Money Bags, and Exact Change to teach kids about different aspects of money management.

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[ Read: Words Of Encouragement For Kids ]

Teaching Tweens And Teens About Money

Pre-teens and teenagers are close to adulthood, which means they need to learn more about managing money, and not just about saving it.

  • Let them earn money at this age. Instead of giving them allowances, give them commissions or pay for additional jobs they do around the house. You could also encourage them to get a part-time job where they can understand how earning money is in the real world.
  • If they have any money saved, you can also teach them a little about investing in small companies on the stock market.
  • Let the teenager open and manage his own bank account. Encourage them to save money for the future, for a college education.
  • Teenagers are naive and can fall into the trap of making easy money and spending more than they can pay back. Teach them to be wary about whom they give their money to and about the dangers of using credit cards.

What most of us were not taught as kids is to be patient with money. Spending the money, even some of it, as soon as you get it is a bad habit that often results in impulsive spending and unnecessary expenditure. Along with the lessons mentioned above, teach your kids to be patient with money. Teach them to hold on to it until they have to part with it.

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When they do, the urge to spend will fizzle out and result in fewer expenses and more savings. After all, that is the secret to becoming wealthy and financially comfortable, isn’t it?

Tell us about your money management tips for children. Share them in our comments section.

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