How to teach children about money

The first time I thought about ‘how to teach children about money’ was when my first son was about 7 years old. Even though he is now over 10 years old, I still teach him various life lessons including how to manage money for kids.

One of the most important principles you can teach your children is the principles of managing money wisely.

Teaching children how money works is an important part of their development in becoming a secure adult. Money is important and irrespective of your financial status currently, it is important to teach your children the rules of money.

Some people say money doesn’t matter and cannot buy true happiness. It is true. However, money is a means of exchange.

Most of the things that will help us to live a fulfilled and happy life will be bought with money.

The Importance of Teaching our Kids about Money

The traditional school system is great because they teach children a lot of life lessons.

However, there are a lot of things still missing in the traditional school curriculum. Money is one of the subjects that no school will teach any child.

In order for our children to live a life without worrying about money, it is important we teach them how money works and the value of money.

The messages you pass to your children about money will shape their beliefs and behaviour around money when they grow to become adult.

How to teach your children about money

Start from being a good example

Our children watch everything we do without us knowing. It is important to set a good example for them in the way we manage our own money. If we cannot track our own spending and knowing what we spend our money on, there is no way we will be able to teach our children effectively.

To make the job easy for us in teaching our children about money, we need to first understand the basics. Saving money and spending money wisely will filter into our children’s attitude towards money.

Part of our children’s money story will definitely come from what they hear from us, the way they see us use money. We will be instilling belief in them as they see us.

How much things cost

When you go shopping with your children, look for opportunities to show them how much things cost. This will help them as they understand the number and they will know the value of money.

Simple lessons about how much one can earn in one hour and how much a particular item cost can be very useful in understanding money.

When I go shopping with my children I do give them cash sometime and ask them to pay. If we are to get some change back, I ask beforehand how much change we are expected to collect back.

Something I also do is let them keep receipts and we sometimes look at the receipts together when we arrive home.

Contentment

We now live in a world where many people are not happy with their life and their financial situation. It is important to teach your children the value of contentment and what it means to be contented.

I teach my children this amazing value especially in relation to money.

Alfred Nobel, the founder of the Nobel Prize, once said, “Contentment is the only real wealth.”

Practising gratitude can help teach a child contentment. At the dinner table or during prayer time, speak to your children about the experiences they’ve had. Being thankful can help them to be content.

Children can easily fall into the trap of chasing toys and gadgets because they’ve seen it with their friends. As a parent, you must teach them to be happy with what you have provided for them. If there is something they want that it is so important and will bring them value, they can have it.

However, things are not to be bought just because someone else has it and they think they should also have the same thing.

There is a good way to teach them how money is earned and the work involved to earn money. You could give them chores to do around the house. Give them money as a reward and when they need to buy things let them use from their money.

Another good strategy to teach kids contentment is letting them share some of the things they have with others. Like taking from the monetary reward they receive for doing chores and give to charity.

Seeing how money can decrease when taking from what you have can help them learn contentment. They will be able to appreciate and be happy with what they have.

Giving

My children already know that part of any money they receive through labour or gift is to be given to charity.

Children need to be thought that there are some people that are less privileged than them. People in the same country or in other countries of the world who through no fault of their own cannot help themself. Giving to such people is a good thing and it’s one of the ways to find happiness in life.

As Christians when we go to church we give our boys some money to put in the offering basket. By doing this they are getting into the habit of giving money.

Giving could also be by giving or sharing some of their toys with other kids.

Piggybank saving

This for me is the first step towards teaching children about money.

It is a very simple yet powerful way to teach your children about money and the concepts of saving money.

Our two boys both have piggy banks in each of their rooms. They use these to save all monetary rewards as gifts from chores they did at home.

You will be teaching your children one of the most valuable lessons in life by this act.

Twice in a year, we open the piggy bank to collect the money they’ve accumulated. We go another step further with our kids by putting the money in their Junior Stocks and Shares ISA Account for investing in the stock market.

Opportunity cost

Kids are not too young to be thought about what opportunity cost means.

It is as simple as letting them understand what they might be loosing if they make wrong money decisions.

For example, you might let your kids know that instead of buying that new toy, the money could be used to buy their shoe or bag for the next school term. Or even better, the money could be put in their investment account and the money can grow.

Please, don’t get me wrong. I am not saying it is wrong to buy a toy or gadgets for your children. It’s just good to use a minimalist approach sometimes. These children have a lot of toys and gadget anyway. So, instead of buying the latest or a new version, maybe let them continue to use the one they already have and wear them out and use things to maximum level before getting a new one.

How to earn money

One of the valuable lessons about money that we teach our children is that money is just a symbol and medium of exchange.

The real money is in the skills they learn. When they continue to learn and acquire important skills, they will be in a good position to offer valuable products and services that will benefit other people.

Money is a net result of providing valuable products and services into the market place.

A very specific example I give our children is when we visit the dentist. We let them know that the dentist is solving a problem of looking after our teeth so they don’t go bad. As a result of this, we pay the dentist for his help and service provided. The money we pay the dentist is a reward to him for serving us.

The dentist will be happy about collecting the money and we also feel happy that our teeth are in good condition.

That is an example of how money is an exchange and how money is used.

My final thought

If you make it a duty to consistently pass the positive message about money to your children. They will form very valuable money habits and these habits will stay with them as they grow older.

As they grow up and form their own money philosophy, part of what you taught them will become part of their belief about money.

Your children’s behaviour around money will be influenced by what they learn from you.

If you do not teach them anything, chances are they might end up in a bad financial state in the future through bad money decisions.