Teaching Kids About Money: 5 Simple Tips for Parents
Teaching kids about money involves more than simply telling them the names of coins and how to identify denominations of paper currency. Helping your child develop financial literacy also lets you share your family values, whether that’s saving for big-ticket items, delaying gratification, being thrifty, or even giving to charities or tithing. Here are five simple tips to help you teach kids the value of money.
1. Count It Out
Coins are a great tool for combining basic math skills with learning about money. Start when your child can count to ten, and use pennies, nickels, dimes, and quarters to teach grouping, sorting, and counting as a fun way to help your kids figure out how money works. Some ideas could include:
- Asking your child to count how many pennies are needed to equal one nickel, dime, or quarter
- Teaching addition by adding pennies, nickels, dimes, or quarters together (or by adding allowances or gift money to savings for older kids) and asking, “How much money do you have now?”
- Working on subtraction skills when your child wants to buy something: “If you spend $5.00 on that book, how much will you have left?”
- Introducing division concepts by discussing how to split up your child’s money—how much to save, spend, share, or donate
2. Give Allowances and Earning Opportunities
While giving kids allowances shouldn’t be a financial burden for parents, many experts believe that this practice helps teach valuable financial lessons to children. Start with a small amount, such as one dollar for each year of age, and show your children what this amount of money will buy. Give older children earning opportunities to make money at home that they can save for a large purchase later on. Such tasks as shoveling snow, weeding, or cleaning out the garage are good examples of short-term activities that help reinforce the value of work for pay.
3. Get Kids Interested in Interest
Older elementary school-aged kids with more sophisticated math skills are ready to learn about simple interest and compound interest. Build on the concepts they learn at school by making it personal: Use print or online resources to show them how their own savings can earn interest over time at your financial institution.
4. Teaching Kids About Money Includes Taxes
If your state has a sales tax, point it out on the receipt the next time your child buys something at a retail store. This is the perfect opportunity to discuss tax basics with your child, such as how income tax works and where your tax money goes.
5. Make It Fun
The basics behind finances shouldn’t be a serious discussion. Teaching kids about money should be fun for both you and your child. Free online money games are a great way to grab a child’s interest and teach them valuable finance lessons at an early age.
No matter how old your son or daughter may be, financial literacy should be a priority in their development. Start teaching your kids money basics today and they will reflect those values for the rest of their lives.