How to Teach Kids the Value of Money

Teaching children the value of money from a young age is crucial in setting them up for financial success later in life. As a parent or guardian, you play an important role in shaping your kids’ money habits and attitudes. Here are some tips on how to teach important money lessons:

Lead by Example

Children learn by observing. As the adult, you set the example when it comes to spending, saving, budgeting, and talking about money. Model responsible behaviours like tracking expenses, paying bills on time, delaying gratification, and saving up for big purchases. Explain your money decisions to kids so they understand the thought process. 

Give Them an Allowance

An allowance provides a low-risk way for children to learn money management skills. Give them a small weekly allowance and let them decide how to budget and spend it. Require them to save a portion for the future. As they get older, increase allowance amounts and expectations around saving and spending wisely. People who foster with an agency like Orange Grove Foster Care Birmingham can explain where the allowance comes from and how it is a portion of the fostering money they receive to care for the child.

Help Them Open Bank Accounts

Opening kids’ savings accounts at an early age teaches them to be hands-on with money. Show them how to make deposits, track balances, and watch interest grow. Let older kids open checking accounts and debit cards to practice recording transactions and staying within balances. Oversee accounts so they learn good habits.

Involve Them in Shopping

Grocery shopping and other purchases present teaching moments. Explain how you comparison shop to get the best deals. Show kids how to calculate discounts and keep within a shopping budget. Let them participate in decisions to weigh wants versus needs.

Discuss Needs Versus Wants

Help kids understand the difference between necessities and discretionary expenses. Explain how spending on wants should come after needs are met. Categorise your family’s typical expenses together so they see the amounts going towards needs like housing, utilities, food, and transportation versus wants.

Encourage Saving Toward Goals

Saving is an essential money skill. Have kids identify savings goals like toys, games, or experiences they want. Work with them to calculate the cost and figure out a regular savings plan. Show them how to save small amounts of their allowance to work toward a bigger goal. Celebrate when they reach milestones.

Introduce Financial Terms Slowly

Don’t overwhelm kids with complex financial jargon before they are ready. Introduce basic terms like income, expense, loan, debt, interest, credit, and charity over time. Explain how each relates to money management as they come up in daily life. An understanding should build gradually.

Consider Allowing Commissions

Earning money can motivate kids to work harder. Consider paying commissions for extra chores above and beyond normal expectations. If they want a pricier item, require them to earn a portion of the cost through commissioned work. This teaches the relationship between effort and rewards.

Teaching sound money habits from an early age can equip kids with skills that last a lifetime. Be a positive role model, get hands-on with money management, set expectations, and make money talks part of daily family life. The financial lessons you impart now can greatly impact your children’s future outcomes.

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Our Editorial Team are writers and experts in their field. Their views and opinions may not always be the views of Wellbeing Magazine. If you are under the direction of medical supervision please speak to your doctor or therapist before following the advice and recommnedations in these articles.

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