Teaching kids about money is an important yet often-overlooked responsibility. Problem is, many schools don’t offer financial literacy classes. That means it’s up to mom and dad to educate children about how to manage money properly.
The key to raising money-savvy kids is building financial instruction into everyday activities. It doesn’t have to be difficult. In fact, the more fun you make it for kids and teens to learn basic money concepts, the better.
No matter the ages of your children, here are five ways parents can easily improve kids’ financial literacy.
1. Play money games with young kids.
While very young kids won’t understand the value of money, a fun game or art project can teach them how to identify coins. Try making paper rubbings of different types of coins.
Place a piece of paper over some coins and create an image of their surface features using colored pencils. You could also trace around the outside of different coins and color in their shapes.
Make a game of matching different images to coins and naming them and discussing their value. Many kids may incorrectly assume that larger coins are worth more than smaller coins. Young children may want to put coins in their mouths, so always watch them closely if you allow them to handle money.
Older children may want to play store with you where they’re selling something you pretend to buy. This is a great way to introduce the idea of business and making money in exchange for goods. You could use real or play money to shop.
2. Show kids how to comparison shop.
Speaking of shopping, you could introduce the idea of negotiating or finding the lowest price as a customer in a young child’s pretend store. For older kids, you can explain how to read price tags and compare an item by unit price and quality.
You could be the pretend store seller and teach kids how to use money to pay for items. If they don’t have enough, that’s a good lesson on how to save for what they can’t afford.
To make shopping lessons more fun, you could take children to a yard sale or a thrift shop. Or you could put on a yard sale and let an older child manage it. He or she could decide how to price items, create labels and negotiate with customers.
3. Pay an allowance for chores.
If you can afford to pay an allowance, there are different ways to set it up. You could pay kids a regular amount with no expectation they do chores. However, paying an allowance that’s earned after completing chores is a great way to help kids develop a strong work ethic. But you’ll need to keep track of assigned and completed tasks in order to make sure you only pay when chores are done.
Young kids could feed pets, fold laundry or help set the dinner table. Older children can load the dishwasher, clean their room or take out the trash. Teens can babysit younger siblings, do yard work and clean bathrooms.
Another option is to pay kids an allowance only when they need or ask for money, instead of paying them regularly. This is a good compromise when you don’t want to pay for everyday tasks, but prefer to pay kids for larger tasks, such as washing your car or working on yard projects.
4. Take kids to the bank with you.
When kids have their own money, help them open a savings account at a local bank or credit union. Many institutions offer kids’ accounts with no fees or minimum balance requirements.
Most banks offer tours that show you their vault and safe deposit boxes. As the child’s balance grows, you can talk about the benefits of earning interest and how the bank rewards people for saving money. This is a great way to introduce kids to the concept of banking.
5. Help teens create a budget.
Learning how to create and stick to a budget is an important discipline. Parents should encourage kids to allocate their allowance and gift money according to the goals they want to achieve.
For example, they could set aside half for savings and half for immediate spending. Or they may want to share a third, save a third and spend a third. Choosing their own charitable organizations or causes to donate to can motivate kids to be more generous.
The whole idea of budgeting is to carefully choose how you spend your resources and to build savings you can tap in the future. But part of teaching money management is allowing kids to spend a portion of their money any way they like.
There are many ways parents can foster good financial habits in their children. As kids get older and more mature, you can address increasingly complex topics, such as building credit, taking out education loans, buying a car and paying taxes. Teaching your children basic financial concepts will always benefit them in the long run.