6 Tips for Teaching Your Young Children About Money
Did you know that children can benefit from finance education at an early age? A study from the University of Cambridge, “Habit Formation and Learning in Young Children,” your 7 year-old has already formed habits about money. According to the researchers, it’s important to begin teaching your little ones financial literacy by age 3. Why? Because they pick up money habits quickly, so giving them the right direction is crucial. Here are six tips you can use.
Turn any room into a make shift supermarket and let your children role play. this will give them a basic introduction to commerce.
Start with basic currency literacy.
Did you know that your 3 year-old can recognize and remember coins?
You can educate your children about the different coins and dollar bills. Have them match pictures of coins with the actual coins. Although children can do this at age three, remember to watch them carefully or they might swallow them. During vacations abroad, consider teaching them about foreign currencies. This will expand their minds and help them learn more about the countries you’re visiting.
When you teach your children how to manage money, you give them a valuable skill for life.
Create money jars.
Money jars are a fun and easy way to educate your child. Create three types of money jars: one for spending; one for saving; one for giving. These three jars cover the basic lessons of understanding how to use money. One financial literacy teacher I know, recommends four jars: one for long-term goals. I say she’s on to something. Learn more about her work here. Teach your children how to use the jars and why they’re important. Have them separate money they receive as birthday gifts or allowance payments among the jars. Your children will learn how to save for the future which will teach them delayed gratification. Use the giving jar for charities. Your children will learn about giving and understand how they can help others with their money. When they donate the money to local animal shelters, food pantries, or not-for-profit that reflect their particular interest, they make a connection between their interest and how to apply it to helping others.
Help your children do the math in calculating how much money they are saving by using coupons. Let them use the savings to replenish those money jars.
Use coupons.
Using coupons can give your children an important lesson on saving. Have them cut or tear out coupons with help from your children and leave them in charge of handling the papers at the store. According to the Children's Financial Network, kids as young as 5 can benefit from learning how to use coupons in a store. They will see how to save money and make wiser shopping decisions.
Teaching your children money management skills early helps them to develop healthy relationships with money.
Set a money goal.
Children can set a money goal to purchase a favorite toy or other item. Money goals are an easy way to teach children financial patience and delayed gratification. The sooner they experience delayed gratification, the sooner they will benefit from it. Besides, it also provides a lesson in how to save money. It’s important to set realistic goals to accommodate age-appropriate attention spans so children will be motivated to stay on a savings plan. If the toy they want is expensive, it can take a while to reach their goals. Will they stay interested? Picking smaller and less expensive targets is better, especially for the smallest children.
Knowing how to comparison shop is another skill that would help your children.
Go shopping.
Let your children use their spend jars at the store to make purchases. Shopping provides an easy lesson setting. How will your children spend their money? Will they use their entire jars at one store or spread them out over many shopping trips? What teachable moment could be drawn from their experience? An outing to the local toy store also gives you the chance to discuss comparison shopping. Point out different prices on similar items and teach your children about finding inexpensive options. Evaluating the results of the shopping trip will help them understand their choices.
Yard sales give your older children an opportunity to practice the art of negotiation.
Use yard sales.
Yard sales offer another way to educate children about finances. Yard sales can help you clean out your children’s rooms and teach them about money at the same time. Ask your children if they want to participate in the yard sale by selling their old toys or clothes. Help them select items they no longer use and find appropriate prices for them. They can use the experience to refill their money jars. Older children can help sell items at the sale. They can keep track of change and watch customers. This is also a valuable opportunity to learn about price negotiations with customers.
Begin your children’s financial education before they are in school. It’s important for them to understand basic money rules and form the right habits.
Learn more about money mindset for minors.
