Begin When They Are Young: The Basics of Money
The ideal time to introduce your kids to the concept of money is
around Grade 2 or 3, coinciding with when they begin to learn basic
math. Introducing concepts like saving and spending through tangible
means, like play money or coins, makes it more relatable and
understandable. Children, especially at a young age, struggle to
comprehend the abstract nature of digital finances. Therefore,
physical representations of money can be a powerful tool in teaching
them the value of each dollar.
Imagine you’re at the grocery store with your eight-year-old,
talking about the cereal they like and how much it costs. If they have
five one dollar play bills, and the cereal costs four dollars, you can
show them in a tangible way that buying that brand of cereal leaves
them with one dollar. This does a few things. First, it shows them
that money is a finite resource. Second, it starts a conversation
about value. They might like the four-dollar cereal, but another
option, which is also okay, only costs three dollars, leaving more in
their pocket after addressing a need. These are concrete ways to get
them thinking about expenses, the value of money, and being thoughtful
about their needs and wants.
Incorporating Allowance: Learning by Doing
An allowance isn't just a reward; it's a teaching tool. Be strategic
when setting an expectation for your child, like not expecting to be
paid every time you help others. Consider giving an allowance as a
means of compensation for things above and beyond household chores.
For example, if your child’s chores include cleaning their rooms,
putting away their toys, and doing the dishes, then mowing the lawn is
an above-and-beyond contribution. Give them an allowance for mowing
the lawn, and the allowance becomes a mechanism for children to manage
money and understand its value.
This approach helps them learn the value of money for time invested,
or a service provided. It also opens the door to demonstrating the
importance of saving for things they want, emphasizing patience and
the satisfaction of earning something over instant gratification. This
method lays the foundation for understanding that money is a result of
effort and achievement.
Learning from Mistakes: A Crucial Part of Growth
Learning often involves failing. It's important to allow children to
make mistakes with their money. It is okay to let them fail, and okay
to not bail them out when all their money is gone. Whether it’s
spending on something frivolous or not saving enough for a desired
item, these experiences are invaluable. They teach the hard lesson
that once money is spent, it’s gone. Now, it’s a question of what are
you going to do to earn more? Encouraging reflections on these
experiences can foster more thoughtful spending in the future. It is
important to think about how we can teach our children to not make
that impulse buy, but to step away and think before they spend.
Imagine your child is headed back to school and they declare that
they don’t want you to do back to school shopping with them. They want
the money and the independence to shop for themself. If your budget is
two hundred dollars, hand it over and reiterate the things on the
list: a couple of pairs of shoes, five shirts, three pairs of pants.
Here’s the kicker. When they come home with only some of what they
need but no budget left, hold your ground! They can learn something
valuable about the choices they make when, by the end of the year,
they’re looking a bit tattered because they chose wants over needs! If
you stick to your approach, what might the following year look like?
Will they come home with different choices and money leftover? What
will they have learned?
Practical Applications: Beyond Theory
Taking children shopping and explaining the differences in prices,
or why saving for something like a trip to Disney World is more
rewarding than instant gratification, are practical ways to embed
these lessons. This approach not only teaches them about money but
also about the value of hard work and planning. You can evolve the
methods you use to instill financial prudence in your children with
their age and ability to understand concepts. To form the right
behaviours around finance is going to be an ongoing, consistent
process. But if you stick with it and do it well, it will put your
kids on a path to greater financial independence and right-size their
expectations around needs, wants, and luxuries.
Financial literacy for children is about much more than numbers.
It's about instilling values, understanding the consequences of
decisions, and preparing them for the financial realities of adulthood.