As a parent of two children, I’ve come to realise how important it is to teach them about money in a way that will give them skills to avoid debt and use their money wisely. I never had lessons about money and budgeting during school, and I certainly wasn’t very wise with my money when I was in my twenties and had started earning, so I feel that anything I can teach them will give them a head start and help them avoid some of the mistakes I made. Here are my Top Tips for Teaching Kids About Money:
#1. The difference between needing something and wanting something
It’s really important to teach them the difference between wanting something new and needing that thing. When my daughters were younger if they asked for something new, we would have a little chat about whether it was a thing that we needed or just wanted.
Then if we did decide to buy the new toy or book or item, we made sure we donated one old one to charity on the principle of one thing in, one thing out.
Tip: Ask your child to identify if this is a need or a want, to help them know the difference.
#2. Where money comes from
Your child may think that money comes from a hole in the wall, but it’s a good idea to start teaching them early on that you have to work to earn money.
Some parents choose to make pocket money tied to chores to emphasise this. In our house, chores are part of helping with the family, and we have given pocket money in the past without an expectation, but recently we found that it was useful to tie certain extra chores (on top of normal ones) to earnings as a motivator.
If you work outside the home taking your child to work one day might also help reinforce that it’s not some mysterious place you disappear to but that you have to do things while you are there in return for your salary.
#3. About bills
As your child gets older, it’s good for them to start realising that bills come into the house and have to be paid. Often the only post we get nowadays (apart from junk mail) are bills. Why not open the bill and discuss it with your child, and talk about how you plan to pay it.
If you have a money tracking app or program or spreadsheet that you use, show them the monthly bill items so that they are familiar with ideas like utility bills, food bills, etc.
One of the best things you can do for your child is to teach them how to budget. This can be done very simply by showing them how to decide on a set amount of money before you go somewhere like a shop and then trying to stick to that set amount.
Talk about planning your money and how you need to have money left over after all the monthly bills in order to buy nice things or save money or have some spare for unforeseen things.
Tip: Monopoly is a great game to start teaching children about money, costs and budgeting too!
#5. Saving money
Another great thing to get your child to do is to save. Particularly if they want something new. How about giving them two jars labelled “Saving” and “Spending” and when they get money they have to put some in each jar?
Take them to your local bank or credit union and open a child savings account. Encourage that they put a portion of their birthday or Christmas or other gift money into savings too.
You can also reward them if they save, e.g. by matching their savings to help motivate the saving habit. We did this recently for one of our daughters who wanted to save up for something big ticket.
#6. Setting goals
Linked to saving money is setting goals for your money, especially long term goals like saving up for big items. It’s also linked to discussing how you apportion money in your life – the two jars idea, some for saving, some for spending.
If you can get these ideas instilled in your child from a young age, it becomes second-nature.
Tip: ask your child to choose a goal, something they’d like to save towards and you could get them to draw one of those thermometer diagrams that fundraisers use to show progress too!
Another lesson to teach your child is about choosing. Very few of us are fortunate enough to have enough money that it doesn’t matter what we buy, so life is about making choices about what you spend your money on.
Discuss this with your child about how they will have to make choices about what they spend their money on.
Tip: Let your child help choose things in the supermarket to give them opportunities to choose what you spend money on.
#8. Good things come to those who wait
Teaching your child that instant gratification is not the way to happiness can also help combat the “buy now, pay later” mentality that could end up getting them in credit card debt later on.
Emphasise experiences more than buying things in their life. It’s tempting as parents to give kids presents all the time, but when we were younger we only had presents at birthdays and Christmas (and we were none the worse off for it).
Tip: when out shopping, tell them we’ll leave the item they want for now and if they still want it in an hour we can come back for it. This gives them time to think and to stop impulse buying too.
#9. Don’t spend it as soon as you get it
This is a tough lesson as cash in hand can “burn a hole in the pocket” as the saying goes, in other words, kids can feel like they must spend it straight away.
Curbing impulse buying goes hand in hand with teaching your child about delayed gratification. So if they have been given some money and are desperate to spend it, chat about what they think they want to buy, how much of it they want to spend before they go to the shop.
Tip: discuss with your child about the need to plan and budget BEFORE you go shopping.
More tips from parents
Here are some tips that Mykidstime parents shared on how to teach kids about money
- “A family day out can end up costing lots. We agree a budget with each child and give them the money on arrival. We are clear they can spend the money on whatever they want, but once spent, there will be no top up!” Denise
- “I give my 6 year old 2 euro when we go to the shop. He can decide to spend the money or keep to another time.” Ophelie
- “I give them pocket money, allow them to budget or not and don’t allow them to think it grows on trees!!!” Fiona
- “I let my 6 year old pay for things in shops. When she gets money for presents we put some in the post office and she spends the rest on herself.” Carmel
- “We encourage saving any bit they get for things they may want or need in the future as opposed to spending every penny on rubbish every time they get a few bob… We tell them money doesn’t come easy so save your few pennies and don’t waste…. Worked so far.” Cheetra
- “When they get money if it’s a pound they can spend it on whatever they want. If it’s Christmas or birthday money they are asked to think about if there is anything that they want or need and if not the money gets saved. They also earn money around the house simple things as she is only 6 e.g. put washing in bathroom 20p take plate out and scrape it 20p keep bedroom tidy 20p help when asked to 20p that kind of thing if all is followed and done she gets a 1.20 reward on top on what she has earned to round it up to 2pounds and so far she has saved her money. She has a good knowledge of the value of money and we will be doing the same with our son” Louise
- “I get kids to pay for things, we role play shop and buses etc. This week we started pocket money!” Megan
- “Not to eat it! Lol. Also that when she finds change in the house that it goes into her piggy bank.” Shellie
- “My 9 year old has to do chores to earn her pocket money (I work to earn mine) and if she wants anything she has to save her money to buy it (just like we do)” Samantha
- “We recently made our son (10) earn money for a jersey by doing jobs – he washed and valeted my car and sold ice cream wafers door to door (my husband of course did most of the work!)” Tara
- “My 11 year old wanted a mini iPad so we said if she saved for half of it we would match the other half. She had some birthday money to start her off then we agreed some weekly chores on top of her normal ones for her to earn the money” Siobhan
Over to now. Did you find this article helpful? What tips do you have for teaching kids about money? Share them with us in the comments below.