Most parents would probably agree that money management is even more important after children are born. That’s why it’s so important to teach our children about good money management habits. Make money part of a child’s life as soon as the child is born, even if the child doesn’t seem to be old enough to understand. Once a child is old enough to handle money without swallowing or eating it, it’s time to give the child a piggy bank. Teach the child to put coins into the bank until it is full. Once the bank is full, take it and the child to a bank or credit union and open a savings account, so that the child can see where the money is going. Get an account summary print-out with the child’s name at the top. Show the child his or her name on the summary and the total. When the account summary comes in the mail each month after that, make a big production out of letting the child open the mail and see how the balance has changed. Make a deal with the child that for any allowance or birthday or Christmas money he or she puts in the savings account, you’ll match it if they deposit the money and leave it in there for at least a year.
Children often don’t understand that in order for parents to make purchases, they must first make money to buy the items they need and want. Children will many times ask for things such as fast food, toys and other items repeatedly and it never occurs to them that Mommy and Daddy have to work to pay for those things. Even a child as young as 2-years-old can have some understanding of money and finances. For example, if a child is repeatedly asking for a McDonald’s happy meal every time her parents leave the house, a parent might explain that they can’t afford a happy meal because happy meals cost money and in order to make more money, the parent has to work more, thus spending more time away from the child. This type of explanation works for some children.
Allowances are a good way to teach children about savings and the cost of things. Give allowances in dollar bills to encourage saving money. That way money can easily be separated from spending money and savings. Take the child on a shopping trip to spend their money. Explain to the child that he or she can only purchase something within their spending limit. If a child only has $5 to spend, they must remember that items will also cost tax. If the child picks out an item that cost more than the money they have to spend, point out that if they want to save their allowance and come back on a different day, they might be able to afford the item at a later date.