For a long time, I assumed my kids were too young to understand much about money. Reading various articles including the study by the University of Cambridge inspired us to start talking to our kids. The Study at the University of Cambridge found money habits in children are formed in children by the time they are 7 years old.
Jared and I decided last fall it was time to start helping our kids learn about money. As Dave Ramsey says ” If you don’ teach your kids how to manage money, somebody else will.”
Even if your kids are older start the conversation about money now. It’s not to late it just might take a little more work.
Teaching Young Kids about Money
What do you want to teach?
The first thing you need to do even before you start teaching your kids about money is decide what you want to teach them.
What is the most important thing you can help them learn about managing money? Use your answer to that question to build what you will teach your kids about finances.
Some of the things we want to teach our kids about money include work and reward, the importance of saving, avoiding debt and giving.
Let the Kids Earn Money
Talking to your kids about money is great but for them to really learn and understand they need to have experiences with money.
Depending on the age of your kids the way they get money will change.
For our toddler and preschool age kids how we give them money changes from day to day.
Some days they have earned money for picking up their toys but they don’t always earn money for it. They help with little jobs around the house just like everyone. But I try to give them options to do a little extra to earn money.
The important thing at that age is to do things quickly. For example, if you tell them they will earn a dollar if they pick up their toys. As soon as the toys are picked up give them the money.
This helps them connect the hard work with the reward.
Remember don’t expect a lot of work from young kids. If our kids are picking up toys to earn money I generally figure if they are helping me until the end that’s good enough even if they only pick up maybe a third of the toys.
At this young age, it is a great time to help them learn work and reward. As they get older you can help them understand the actual value of the work they are doing.
Clear Glass Jar
There are a lot of cute little piggy banks out there and at first, I was tempted to get them for my kids but a clear jar works so much better. This allows my kids to see their money.
Spending Money
The best is when there is something your child really wants. Our little boy has really wanted the Lego Movie 2 and has been saving his money and counting down the days until the movie is out so he can buy it. Because he really wanted this movie he hasn’t asked for other things because he knows what he wants to spend his money on.
This morning the Lego Movie 2 was available on digital copy and our little boy was so excited to give me the money so we could buy the movie. He even had to call grandma to tell her he paid $20 to get Lego Movie 2.
Jared and I could have easily purchased this movie and thought nothing about it. But allowing our 4-year-old to save his money and buy this movie we gave the movie more value and our son now has a feeling of pride at being able to buy the movie.
Letting them shop
When our kids don’t have something specific they are earning money for we let them take their money to the store to pick out a toy or something else they want.
They have fun exploring and when they want something if it’s over the amount of money they have we explain that if they want that toy they can save their money and we will come back or they can pick something else.
Explaining often involves counting the money they have and looking at the numbers on price tags and explaining how much more money they need. After explaining we always offer to give them more jobs to earn more money.
The big thing with shopping is letting our kids handle the transaction. They have their money and they have to hand it over in exchange for what they are buying.
Bonus: because our kids know that they have money at home telling them we will have to come back when they have their money to get something they want has helped us avoid a lot of meltdowns.
Saving
Right now we aren’t focused on teaching our kids about saving simply because they don’t handle very much money. We want them first to understand the work involved in getting some money and then how money is exchanged for goods.
We do talk about saving when they don’t have enough for something they want but we don’t have them save a set amount. As they get older this will change and we will have them start regularly saving.
Teach by Example
It is often said that kids are like sponges they pick up everything. The hard thing is that kids learn by what we do not what we say.
As hard as it can be the most important way we can teach our kids about finances is by our example.
Since right now we are focused on teaching our kids how money works we try to use cash as often as possible when we go shopping with the kids. So they see us exchanging money for goods. It’s hard to understand the concept of money when they only see you swipe the plastic.
We also try to let our kids see us doing is budgeting. We want our kids to know how to budget, so we let them see us doing a budget each month.
As our toddler and preschool age kids get older we will involve them in other aspects of finances but for right now helping them understand how money works is how we are trying to help them set a base for future success in managing their finances.
What things have you done to teach young kids about money?
If you found this post helpful please share it!
This is such a great post. It’s so important to teach our kids about money from an early age. And I agree, a clear jar is best for them to be able to see all the money they’re earning!