Teaching Kids About Money Through Everyday Things

By Parcsen Loke

This is the second in the series of articles on Kids and Money.


Long before most children can add or subtract, they already have a concept of where money come from – the ATM, of course. Understanding that their parents have to earn their money through hard work requires a more mature mind. But gradually they will be able to connect the dots. They will understand why their dads (and mums too) have to leave the house everyday and be gone for many hours – because he has to go to a certain place and bring money home.

By age three, like my daughter, most children will know that things are bought with money. One day my two and a half year old daughter wanted something. When I told her that we did not have it she replied saying, “Then, buy it.” For the next twelve months, she would point at things like her clothes, her toys, her books, and ask, “Who bought this for me?” We would then reply, “Daddy bought this,” or “Mummy bought this.” We would try not to forget to add that it was by the grace of God that we had the money to buy it in the first place. We wanted to impress upon her that all good things come from our Father in Heaven above.

Teaching a child about money is not rocket science – it is a relationship.

Here are ten ways you can teach your child about money through the everyday things you do:

  1. Communicate with your child your values concerning money – how to save it, how to make it grow and, most importantly, how to spend it wisely. Don’t just tell them your ‘rags-to-riches’ story (if you have one to tell); tell them the principles and methods that contributed to your success.
  1. Help the child understand the difference between, needs, wants and wishes. This will prepare them to make good spending decisions in the future.
  1. Set goals with your child. Every toy or other item your child asks for can be turned into an object lesson on goal-setting. This will help the child learn to become responsible for themselves.
  1. Use regular trips to the market or store as opportunities to teach your child about the value of money. About a third of our take-home pay is spent on groceries and household items. Spending smarter (using coupons, shopping sales, and comparing unit prices) can save you a considerable amount of money each year. You can show your young ones how to plan economical meals so as to avoid wastes and use leftovers efficiently. When you take children to other kinds of stores, explain how to plan purchases in advance and make unit-price comparisons. Show them how to check for value, quality, repairability, warranty, and other consumer concerns.
  1. Evaluate TV, radio and print ads for products. Will a product really perform and do what the commercials say? Is a price offered truly a sale price? Are alternative products available that will do a better job, perhaps for less cost, or offer better value? Remind them that if something sounds too good to be true, it usually is.
  1. When using a credit card to make a purchase, take the opportunity to teach children about how credit cards work. Explain to the child that you are paying with money that is not yours when you use a credit card. Tell them about the uses and abuses of credit cards and warn them against credit card fraud.
  1. Discuss financial decisions as a family. This will model for your children the process that should be taken to make a purchase decision, especially a big one. They will learn not to buy on impulse all the time.
  1. Give allowance to your child in denominations that encourage saving. If the amount is $5, give them 5-1-dollar bills and encourage that at least one dollar be set aside in savings.
  1. Demonstrate the value of saving over spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money your child saves at home; your child can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, he also will realize that the quickest way to a good credit rating is a history of regular, successful savings.
  1. Take your child to the bank and open an account for him. Opening a bank account is almost like a rite of passage for a child. It is an experience of a lifetime.

Parcsen Loke is the Deputy Director of Family Life First. He has been serving people and communities for more than 20 years, both locally and abroad. His is married to his wife Kelly and has three children ages 23, 21 and 10.


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