6 easy ways to teach children about money

Teaching children from an early age how to save and budget in a fun and educational way, can lay the foundations for sound money management later in life. Most would agree, that the earlier children are introduced to a foreign language, the quicker they are able to pick it up. The same can be true when it comes to teaching children about money and developing their financial fluency.

A recent study indicates that with as little as 10 hours of financial education, teachers and parents can positively influence children’s future saving and spending habits.

A good starting point for teaching children about money is by showing how money is used in exchange for goods and services, demonstrating that in making their own purchases they are in fact trading with the shop owner and receiving a product in exchange. For example, next time you are shopping, let your child hand over the money to the cashier and after you have left the shop, you can talk about how the money paid for the item.

6 easy ways to teach children about money

1) Fun, fun, Fun - make a game of both saving and spending. If spending money alone is fun then they will rarely associate any pleasure with saving.

2) Routines - If your child receives money as a present, establish a routine, for example by putting some or all of it in their piggy bank or savings account. The tradition may be upheld for many years and go forward into their own families.

3) Consistency - If you give pocket money, or allowance, in return for helping around the house, make sure they actually do the work! Even very young children can be responsible for tidying away their own toys or clothes. It’s a good idea to give a set amount on a regular day but also giving them the opportunity to earn more if they seek it so as to encourage their entrepreneurial spirit.

4) Look after the pennies - Turning off the lights, saving the pennies and giving small donations to charity collections are small things that create positive habits which may last a lifetime. Ensure that you explain why you are doing it and what the benefits are. Charitable giving can illustrate to your child that there are others less fortunate and introduce the idea to be grateful for the things they have.

5) Consequences - When your children ask for something, rather than say no. Ask them if they would like to buy it from their own money and explain what the consequences are. You may find that they are slightly more reluctant to spend their own money than they are yours!

6) Praise, praise, praise - by praising we reinforce positive behaviour and will encourage children to do the right thing out of choice ‘because it feels good’. This can be applied to saving, spending wisely and giving to charity.

It is important to always approach teaching children about money with openness and honesty, giving a constant and clear message. Explain to them why they can or cannot have certain items they wish to buy. You can’t always say yes to a request for money and it does few favours being over indulgent; but equally the ‘because I said so’ line has little educational merit.
Consider also the type of signals you are sending about money that your child picks up on. You may consider it important to let your child know that family money matters are private, and not for discussion outside the home. If however, as parents you talk in hushed tones over bills and bank statements, your child may figure out that finances are something to be secretive and furtive about. Similarly, if they pick up some of their parents' stress and anxiety over money, this too is an unwanted value that can be carried forward into adult life.