Home Family Children Money Money and Kids

Step 1: Start Teaching Your Children Early

The earlier you start exposing your children to basic money matters, the better they will be able to understand the concepts and value of money as they get older. Depending on your child's age, you can try a few different approaches:

• Explain to them why you work, who you work for, what you get in return, and why you need money.
  
  
• Teach them about coins and dollar bills. Show your children how many coins will equal a dollar, and how many dollars equals a five dollar bill, and so forth.
  
  
• Use available free publications such as free comic books from the New York Fed. Mint highly recommends Once Upon a Dime, A Penny Saved, and The Story of Money.
  
  
• As they get older, branch out into other topics, such as how money works in a larger picture (maybe your child will love macroeconomics), how a credit card works, and how insurance works, etc.
  
  
• Take them to a money. There are adult programs available too, so you can both learn together. Have quality time with your child as you expose them to the harsh monetary reality of the world. How can you beat that? (Just kidding.)

Key: Take advantage of teachable moments! For every life situation and question your child has about money, use that moment to discuss the issue in deeper detail with your child. Questions about how coins and bills work? Talk to them! Their monthly bank statement just came in the mail? Use that opportunity to discuss issues such as interest rate, bank fees, and saving bonds.

The important thing to remember when teaching your child about money is that you don't necessarily have to be the know-it-all mom or dad. Being a financial whiz is not a requirement to teach your child sensible and sound financial choices. If there are topics you don't know well, take the opportunity to learn together!

Step 2: Teach Your Children a Sensible Consumer Life

As your child begins to understand the value of a dollar, teach your children a sensible consumer life by living a sensible consumer life yourself. Show them why delayed gratification is important.

Key: Have them understand the difference between a "want" and a "need."

How can your child differentiate between these closely related emotional feelings? Each time you make a purchase for your child, both you and your child should consider these questions:

• Do they already have what they're asking for?
  
  
• If so, is it broken, lost, or irreparable?
  
  
• Do they often use the item
  
  
• Why do they need this? Will it:
  
  
• Teach them the skills they need?
  
  
• Help them with school work?
  
  
• Improve their life culturally?

The more you and your child consider these questions, the more adapted your child will be in making sound purchasing decisions and avoid frivolous spending.

Step 3: Teach Them the Joy and Importance of Saving

Saving money can be quite fun for younger children. Consider these various piggy bank offerings to help your younger child start saving:

• Moonjar Moneybox
  
  
• Money Savvy Pig
  
  
• Old Shoe Box

Show them the magic of compound interest and why saving while they're young is important. Help your child start a savings account at a local credit union or community bank. As they get older, expose them to a ATM card and other financial instruments such as certificate of deposits, money market accounts, and saving bonds.

Step 4: Show Them the Importance of Avoiding Waste

Educate your child on why simple things such as turning the water and lights off are important. Teaching opportunity? When the monthly utility bill comes, show them how their water and electricity usage will directly affect the household bill.

The examples that your child can grasp easiest are the ones they can see. Explain to them that for every dollar they save in unnecessary waste, they can better spend that money toward things they truly care about.

Key: This step is important in establishing to your child that your wallet is not a bottomless pit. The sooner your child understands that wasteful actions affect the money available, the sooner they can take action to direct their own money to things they truly care about.

Step 5: Give Your Children Purchasing Ability

In order for your child to understand money, they will need to have money. Giving your children allowances can be quite tricky, so here are some things to consider when you decide to give your child an allowance:

1. How much does the child need? What they will use it on affects this decision.
   
   
2. How much can you afford to give? If your finances are tight, it is important to set boundaries. After all, it would be a bit silly if your child has more "spending money" than the household.
   
   
3. How much can they safely handle? Age also plays a factor here. If your child is too young, they may not be able to handle a large sum of money safely.

After you have decided on the amount, here are things you need to keep in mind as you give allowances:

• Be consistent. Give at a set time and a set amount.
  
  
• Adjust value as your child grows and life situation changes.
  
  
• Don't make it a habit to give extra spending money. Save it for special occasions such as family vacation.
  
  
• Don't give and forget! Check in with your children periodically to see how they're utilizing their allowances for saving, spending, and investing.

Step 6: Teach Them Personal Responsibility

This is perhaps one of the most important steps in teaching your children about money. If you happen to ignore all the other steps but nail this one down completely, your child will most likely be perfectly competent in money matters.

Teaching personal responsibility involves creating a value system for your child. The values you should impart on your child are important skill sets such as self-discipline, ability to think about and solve problems on their own, and the ability to admit to mistakes and learn from them.

Here are a few things to keep in mind:

1. Have reasonable expectations for your child. Don't expect a 30-year-old job performance from a 10-year-old.
   
   
2. Teach the skill until it becomes a habit. Everything afterwards will become more automated.
   
   
3. Teach by example. Assume your own responsibility and show your child how to be a responsible person.

When your child develops a responsible value system and better understands the worth of possessions, the worth of hard work, and the worth of time, everything else, including money matters, will fall into place!

Mint is building a free, simple, and secure personal finance web-app. Designed to be effortless, Mint consolidates your financial life in one place. See where your money goes and know when your bills are due. Patent pending algorithms even show you personalized ways to save and make more money. If your finances could use organization without effort, Mint is for you.

Take the Next Step:

• Does your child know the difference between "want" and "need"? If not, begin to teach the difference today.
• If you haven't already done so, take your child to open his/her own savings account.
• Check out the kid-friendly, free publications at newyorkfed.org.

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