Start ’em Young: Teach Personal Finance Lessons in the Family

by Gina Blitstein · 0 comments

Children learn their first life lessons in the family. Among those lessons should be those that deal with personal finance. Money is an intrinsic part of life and, as such, can be taught in a very contextual way within the day-to-day activities and realities of family life. As a resource, it must be managed and as a tool, its proper use must be practiced.

Teaching children about money

The first step to teaching children about money is providing them the basic facts.

What is money?
Teach children early on that money is something we trade for items and experiences. They should learn at as young an age as possible that many things we have and do in life cost money. Reference things they know well to illustrate the point: A new bicycle or set of markers costs money, as does going to a movie and a trip to the ice cream shop.

How do we get money?
Children don’t think about where money comes from; they just know it “exists.” Explaining that we receive a certain amount of money for doing work and sometimes as a gift is an important way to help them understand its source.

What are the value of things in relation to money?
This is really the first step to helping children understand money as a resource that needs to be distributed mindfully in order to have the things we need and some of the things we want. Talk frankly with children about the cost of things to help them understand upon what the family money is spent. It’s perfectly acceptable to tell children that certain expenditures are more than the family can afford or are something for which we need to save.

Lessons children can learn about money with prudent guidance

Once they possess the basic concepts, children can be taught to handle some money of their own. Paying them an allowance for doing chores is a logical way to help children experience the correlation between work and money. With some guidance from you, this process can help them learn some vital personal finance lessons, including:

  • First-hand experience with the challenges of spending and saving – Handling money presents an ideal math-in-real-life scenario. Adding funds to their savings, calculating the difference in price between items they’d like to buy and subtracting money from their balance to determine how much remains provides children with actual experience in seeing how money comes and goes.
  • Prioritization/decision-making – When children are allowed to manage some money of their own, they will soon realize that it only goes so far. They’ll be faced with the very true realization that they can’t have everything they want and that they’ll have to make choices when determining how to spend their money.
  • Benefits of saving – Children who save learn they can accrue enough money for something that costs more than they have today. While delay of gratification is difficult to accept, it can be character-building as well as wealth-building. When children save toward a goal, they learn self-discipline and patience that will serve them well with their adult finances.
  • Responsibility – Teach children to be responsible with their money in every sense of the word. When they are carrying money, keep it in a safe place on their person. When paying for something, carefully count it out themselves. When storing it, keep it in a secure place where it won’t be lost or stolen.

Children who learn personal finance lessons from a young age start out with good habits and a strong command of money which will last throughout their life.

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