Financial wisdom doesn’t come naturally. Like all important life lessons, it must be taught contextually and refined over time in order to become fully incorporated into the way we think. If we want to raise children to adopt responsible and realistic ways of thinking about money, it’s best we start early to make it an intrinsic part of their lives.
Teaching children about money, its use and management, will lay a foundation for a healthy lifelong relationship with finances. As one of the realities of life, money management should be right up there with the teaching of fundamental principles like personal hygiene, safety, nutrition and interpersonal relationships.
Make money a topic of family discussion that’s addressed like any pertinent issue such as food, activities and school. Help children begin to put money in perspective by teaching them these basic concepts throughout their formative years:
- Define money as a resource. In the same way we teach addition and subtraction, money can be conceptualized as a finite resource: If Timmy has three apples and eats one, how many apples does he have left? The apples could just as well be dollars, which get “consumed” by spending. Another money-as-resource situation could be expressed as: We’re saving to go on a family vacation, so we can’t spend for new bikes until next year.
- Explain the difference between needs and wants. The ability to make the distinction will help children understand that no one has everything they want but that they can get more of what they want by earning and saving.
- Provide a realistic frame of reference. Children have no idea what it costs to provide for the family on a day-to-day basis and save for both special treats and emergencies. They see what others have and assume the financial playing field is level. Without making them feel under- or over-privileged, provide concrete examples of the value of both what they have – and of what they want: We prefer to spend our food budget eating most meals at home because eating out is more expensive; we can spend the money we save for going to the movies.
- Be mindful of your financial terminology. Try to avoid phrases like “can’t afford” and subjective words like “rich” and “poor.” Children should understand the words, but try not to assign them to individuals or possessions, lest they lead to ill-informed judgements about people and money.
Games and activities help children to grasp concepts in an age-appropriate manner, making it easier for them to recognize the information as relevant. Fortunately, there are a plethora of games and activities to help teach these important financial concepts. Here are a few, in a variety of forms:
- Playing “store” is an often self-initiated activity for children. You can help make it a more potent learning experience by “pricing” their items and helping them pay and make correct change. If you prefer a more realistic way to teach children about the marketplace, take them with you when you shop. Actively involve them in choosing items, price-comparison and adding up totals.
- Old-school board games, like Monopoly, Payday, Life, Easy Money and Park and Shop are some of the ways previous generations were first exposed to counting and sorting money, buying, spending, selling and trading things of value. If you’ve got these games around the house, they can be an enjoyable way to reinforce concepts.
- Dollars & Cents Activities
- Practical Money Skills for Life
- Money Games
- Jump$tart’s Reality Check
Learning financial responsibility young will nurture a lifelong confidence and competency with money.
How have you taught children about money and its management?
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