As a parent, you need to start teaching children about money as soon as possible. The reason for this is that a majority of children are not being taught money management skills in school anymore. In this article, I will share activities for various ages that will help children understand some concepts with money in a fun way.
1) With young children, a good first habit to learn about money is delayed gratification.
Take a jar or other large clear container and keep within sight in their room (may have to put it up higher if they’re at an age where they like to put things in their mouth). When they do something good as far as a behavior (pick up toys, sharing, etc.) put some change or dollars (your choice based on your budget) into the container.
Once it builds up to a certain point, the money is taken out and the child can spend the money on whatever they choose. Something that’s going to happen after doing this process several times is children figure out that leaving the money in the container longer results in a nicer reward.
2) Another good habit to establish is showing them different ways that money can be made.
Schools usually cover jobs, but very few teach businesses as an option. With elementary school aged children, play money is a fun place to start to learn how businesses work. I had a set when I was younger, and my brother and I used to play “store” and buy each other’s toys.
At this age you just want to keep it fun and have them recognize the different values (both change and dollars) and that money has value for transactions. When they reach the point they can understand, you can explain that some business owners buy a lot of things at a cheaper price and make profit by selling it at a higher price.
3) For saving and investing, showing children the example of what a penny doubled over and over again (.02, .04, .08, .16,…) for 30 days is helpful.
You can do this with most calculators. Most people put it in the form of a question of “Which is better, the penny doubled over and over again for 30 days or a million dollars?” This is a great way of easily explaining compound interest on a child’s level. You can then explain this is why people invest their money–to hopefully get a bigger and bigger return as time passes.
4) Giving is the last habit I want to address.
I think of giving as investing in other people. There is a benefit to it in that you become a better person through the process of giving to others. It also keeps you in balance when it comes to how you handle money. Give your child a chance to give money at church or your favorite local charity. It’s better when it’s money they’ve earned because there’s more of an emotional attachment involved.
5) For teens, there is usually a greater opportunity for them to apply the basic principles I’ve mentioned in the previous steps.
You can help them save for their first car without going into debt (delayed gratification and saving). If they bring in an income, you can see if they qualify for a Roth IRA. They’ll know from learning about compound interest that a few hundred dollars as a teen could mean millions to them by the time they reach retirement.
Lastly, encourage your teen to explore businesses as an option of income. If you’re creative, many businesses cost very little money to start, and the learning experience is valuable considering upcoming generations are going to have a lot of career changes during their lifetime compared to previous ones.
- I believe every high school student in America needs to read the books Rich Dad, Poor Dad by Robert Kiyosaki and The Total Money Makeover by Dave Ramsey. I’m not affiliated with either of them, but between the two they provided my husband and I with a solid financial foundation. I wish I had known about them sooner.
- Don’t let your child get upset if they come up with a business idea that fails. Unlike what’s taught in academics, failure in business is a form of education and is definitely part of the process.
- Don’t let your child believe that debt is the way to success. That’s really been pushed on my generation (I’m 25), and I’ve heard stories that it’s getting even harder for current students as far as how much debt is marketed to them. As a parent, you need to be there with an alternative point-of-view.