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Teaching Kids to Manage Money

Written by Jana Klinderová, Educational Specialist at Lipa

Kids copy everything you do and this is no different from how they see you handle money. How you deal with money, your attitude and your feelings about welfare, fortune, and poverty, will all have a large influence on how your children will manage finances in their adult lives – even in regards to their job, personal values, and potential fortune. The most effective way to teach kids financial education is to be a good example for them. When is the best time to start? Right now!



Some parents worry about exposing their children to money too early because they want to protect them from adult pressures, but helping your child to understand and respect money from an early age will help them manage it better later on. You can start by letting your child see and handle notes, coins, and cards, and to pay for things and tip people, so that they can become familiar with money as a part of their everyday life.

 

Money and its value

Explain to kids what coins, money, checks, and credit cards are and explain to them how these forms of finances work. Explain to them where money comes from. For example dad and mum have money from their work, grandpa lives from money he has saved during his life.

Relate to them the notion of earning. Take your kids to your job and show them what exactly you do, talk with your kids about ways of making money and about different jobs. Explain to your kids how long you have to work so that you can buy those new shoes, that new bicycle, or go on a holiday.   

 

Kids love role-playing

Create “kid money” to play with. Play like you’re in a store, sell and buy toys, fruit, or use old boxes to pretend to be various items for sale. You can even bargain with your kids to help build negotiation skills. Talk with kids about the value of money. More items cost more money. An old car costs less than a new one and when you spend less on one thing you have more for other things.

You can also think about an extra activity or chore for your child and for which they could be given some small amount of money, like taking the trash to the dumpster, hoovering the inside of the car, and so on. But this shouldn’t substitute the housework which kids do as a contribution to the household.

 

Need vs. want

It is important to explain to kids the difference between what we really need–like buying food, paying rent, paying for electricity, school, and all the necessary costs for living–versus things that we want–like cool clothes, other toys, magazines, or movies. Kids should know what the family spends money on.

We can also mark a savings goal for the family like a weekend trip or a circus visit. This will support the family to work as a real team.   

 

Money management

Explain to your kids the difference between spending (on needed vs. wanted things), saving, and sharing money and the value of being charitable. Encourage kids to save money in a little piggy bank regularly. When they want to buy something with their own money, talk with them about their plans, but let them decide.

Encourage kids to share with others their time, ideas, skills, and not only things and money. Encourage them to support someone, choose a project or charity that as a family you can support together. Let the kids choose toys they no longer play with and clothes that are too small to give to neighbors, the homeless, and people in need.  

Use money wisely and your kids will do the same.

 

Sources:

Kiyosaki R., Lechter S., Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!,  Warner Business Books, 2000

 

Recommended articles:

How to Raise a Child with a Growth Mindset

How to Encourage Kids’ Patience