There are many difficult aspects of child rearing, but ask any parent, and you’ll likely hear that teaching children about money isamong the most challenging. The reasons for this are numerous. For starters, the best way to teach children about is to lead by example, and not all parents have their own finances or spending habits in check. Secondly, parents must teach their children not just about saving (which is a somewhat straightforward concept), but about spending responsibly (which is markedly more difficult and is often fraught with emotional complications. And, of course, a large part of teaching kids about money is teaching them how to make money, a burden eschewed by many teenagers and illegal for many younger children.
For these reasons, I’d like to break this topic into a short series that will cover this complex topic in depth instead of glossing over the critical issues. This article will focus on how to teach children aged 5-10 about money. The second part will examine how to reinforce the lessons when children are aged 11-18, and the third part will address how to deal with children who don’t have a healthy approach to money despite your best efforts.
Many parents think that teaching kids about money from a young age is unnecessary because the children are too young to appreciate the lessons or to grasp the concepts. I’d like to propose, however, that teaching children aged 5-10 about money is the best time to introduce them to the idea of fiscal responsibility, because they’re eager to learn and will be interested in the topic because it makes them feel ‘grown up’.
Lessons for children aged 5-10:
- Hard work (hopefully) leads to a stable income. Children aged 5-10 aren’t old enough to understand budgets or business strategies, but they are old enough to appreciate that Mommy and Daddy have to work so that they can make money to buy things for the family. This understanding will not only reduce the resentment that some children feel when their parents are constantly working, but will set the stage for further lessons about money.
- Don’t spend more than you earn. Kids have a tendency to want a lot of things. Explaining that you can’t spend more than you earn is a good way to curb your child’s constant requests. Teach your child how to prioritize between two things that he or she wants, because you don’t want to spend money on two things so you won’t exceed your earnings. Try not to use the word ‘can’t’ when explaining this principle, lest your child think that you aren’t earning enough and worry about being poor.
- Money management starts at a young age. Your child may not be able to work at a young age, but he or she can earn money at home by behaving nicely, getting good grades or doing chores. While paying young children is a controversial policy, I’d like to suggest that doing it properly will help them learn about saving responsibly and spending responsibly. A child who can afford his or her own gum, stickers or baseball cards will have a sense of pride, and if you can teach him how to save some money in the process, you’ll be well on your way to raising a fiscally responsible young adult.
- Good things come to those who wait. Don’t let your child use his or her money for instant gratification. Instead, explain why saving up for a larger purchase will feel even more rewarding and exciting. Teach your child how to set economic goals and to work towards those over a set period of time. With an end in sight, goals will seem manageable and your child will stay focused while learning a valuable lesson.