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.


Teaching Kids About Money – When to start

By Parcsen Loke

This is the first of a series of articles on Kids and Money.

Parents, in general, spend at least 18 years preparing their children for a life of independence and productivity. But only a few hours are spent teaching them the value and use of money. Most parents are faithful and diligent to fulfill their responsibility in providing for their children – feeding, clothing, and educating them – and many work hard so that they can give to their children more and better things. But if children are not taught from an early age to be wise with that which is not theirs how can they be wise with what is theirs when they grow up.


teachingkidsaboutmoneyJust how early should parents start to teach their kids about money? With respect to this, Warren Buffet, one of the most famous billionaires in the world, observed that, “sometimes parents wait until their kids are in their teens before they start talking about managing money when they could be starting when their kids are in preschool.”

So when is a good time to start? He says, “Teaching kids sound financial habits at an early age gives all kids the opportunity to be successful when they are an adult.”

To be effective in teaching your child about money, you need to employ these three methods: Communication, Example, and Application.

Communication. Parents must verbally communicate sound financial principles to their children on a regular basis using everyday situations as case studies and illustrations. Make a list of these principles so that equal emphasis will be placed on each one of them.

Example. In addition to teaching the principles to the children, parents must be an example showing how these principles are applied in daily life. This is the more crucial part of the training process because, as they say, “more things are caught than taught”. The adage “Don’t do what I do, do what I say,” doesn’t work. Your children will ultimately do what you do more than what you say.

Application. After they have heard the principles from you and seen the example lived out in you, it is essential that you allow them to practice it. Practice makes perfect. So, without practice the children will not have the opportunity to taste the reality of the principles and be convinced of its benefits. Practice is also important because what we want to achieve at the end of the day is financial discipline in the child.

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.