5 Hot Tips to Teach Kids about Money

kids-save-moneyIf your younger children cannot yet read or understand all of the guidelines listed here, that’s okay. You can read or explain each one to them whenever you think they are ready for it. For now, read through the list yourself so you would get a better idea of the concepts you must help them learn.

#1 Know what Money is

For very young children, counting numbers, just like learning their ABCs, is a good first mental activity. It is best taught with the use of songs or poems, which are not only fun for the kids, but can also help them connect in their minds the abstract idea of numbers with actual real-world objects.

Indeed, counting numbers is a necessary first lesson when you’re trying to teach children how to handle their finances. After all, how can you teach them about money when they don’t even know how to count?

Once they’re confident with counting – and maybe even with adding and subtracting, you can then start teaching them about money itself. You see, very young children may have different views on money.

For one, they logically believe that metal is better and more valuable than paper. Maybe this belief stems from all those pirate stories where the coveted treasure is always a chest full of gold coins and shiny jewels.

And there’s also the story about the pot of gold coins that the leprechauns hide at the end of the rainbow. Whatever stories they do believe in, children need to learn that in real life, paper bills are usually more valuable than coins.

Second, they also tend to think that more is always better. They’ll gladly take ten two-dollar bills over a single fifty-dollar bill. This is where math skills of adding and comparing numbers come in really handy.


#2 Know what you can do when you have money

Money isn’t just for spending. It’s also for sharing and saving – whether for long term which is also known as investing or for a future purchase of a big ticket item.

Money Principle #2 is to help your kids save, spend, and share at a young age. The younger they are, the better their financial habits will be when you teach them this guideline.

Help them divide their money into three portions: an amount to save, spend and share. Choose a percentage amount that makes sense to your child and designate three separate banks, jars or other containers.

Each has a dedicated purpose:

  • An amount to SAVE: This can be long-term a goal or a big ticket item.
  • An amount to SPEND: This is the money your child might spend on immediate items such as going out to the movies or buying treats.
  • An amount to SHARE: The amount they share might go towards community causes such as an animal shelter or church offering. It could also be a gift fund for family and friends.

For example, if your daughter receives $100 for her birthday, she might put 50 percent in her save jar, 40 percent in her spend jar and 10 percent in her share jar.

You can have some fun here. There are money-saving jars or piggy banks that you can purchase online or you can also make your own DIY Save, Spend and Share banks.


#3 Know the difference between Needs and Wants

Needs are things you must have to be able to live. Wants are things you would like to have but can live without

This doesn’t directly involve money but I believe that this is one of the most important concepts children have to learn when it comes to finances. You can start asking the kids what they think they need to be able to live.

You can tell them that there are three things everyone needs to survive: food, clothing and a house to live in. Then there are the things that everyone needs to live well – these are not as important as the three basic needs, but we need to have them if we are to live a good, happy, decent life.

Examples are transportation, education, health protection, life insurance and leisure activities. Living without these needs makes life more difficult.

However, it is easy to confuse our Wants with these Needs. For example, is eating out a Need or a want? We can say this is a leisure activity that we need to live well, but it is also something we want. The answer will ultimately depend on every person’s situation.

The important thing is to be able to live within your means. If you only have a little money and you already have enough food in the house, then you shouldn’t eat out. Eating out in this case can be considered a want that you can live without.

kids-work-for-money#4 Try to buy your Wants only with the earnings of your savings

Or at least buy them only with part of your savings.

Kids need to learn that they need to spend on their needs first. If they do want to buy something they really like and it’s not yet Christmas or their birthdays, teach them to save for it.

If they already have some money saved, tell them to use a portion of that savings. If it’s not enough, then they may need to save some more.

This guideline also teaches children to wait and that they couldn’t just get what they want at the snap of a finger. I believe that the root cause of most financial difficulties in adulthood stems from the need to be instantly gratified.

The primary reason that most adults have financial problems is not because of low earnings. The reason is the lack of self-discipline and the inability to delay gratification. They see something they want and they have to have it immediately.

Whether it is an iPad or a Starbucks latte, people have no sense of self-control when it comes to their money. They whip out their credit card, take the item home and then figure out how to pay for it later. This type of mindset about money will lead people to financial ruin in no time flat.

#5 Money earned has to be shared

Sharing brings more blessings.

Sharing is an important principle to teach because while learning the importance of wealth or financial independence, it is easy for children to get the wrong ideas. This is why you should keep reminding them that although they must strive to earn and accumulate enough money, they should not make this the primary focus of their lives.

They should try to acquire money not for the money itself, but for the happiness it could bring them and the people around them, especially if they share it. Again, money or wealth is important, but it is not everything.

Kids do not have much money or possessions to share in the first place, but we should still encourage them from the very start to always share whatever little they have. Sharing our blessings always brings us more blessings, especially when we do not expect anything in return for the good that we do.

While it is laudable to give to those in need, it is also important to explain to our kids that they are not expected to give everything away – they also have to save some for themselves that they can grow.

Otherwise, there might come a time when they will not have anything to share. Furthermore, it is not realistic to think that someone will always be ready to support them when it is their turn to need help.

You can read some good books about children and money HERE. These are really helpful to a lot of parents and their little ones.




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