Teaching Your Toddler
At this age, children are just beginning to develop habits and skills that will last a lifetime. Teaching foundational concepts early will allow children to better understand more complex financial principles as they grow older. One foundational building block is that of money as a medium of exchange. Children learn that money has value because it can be exchanged for other things that are needed or wanted. By playing “store” with your child and exchanging items for coins, you begin to teach this concept. Now is also a good time to teach children equivalency. As soon as you child can count, begin to teach that five pennies equal a nickel, five nickels make a quarter, and four quarters equal a dollar. Finally, teach your child that saving money will get them what they need and want. Pick a savings goal that the child can achieve very quickly--like a box of crayons. To make the savings goal seem real, tape a picture of the crayons to a savings jar and give your child a few coins each day to reach the goal. Once the purchase is made, be sure and praise your child for reaching the savings goal.
Choices & the Elementary Age Child
Starting a weekly allowance for elementary age children will help prepare them to make good choices regarding their money. Many experts caution that for an allowance to be most effective as a tool to teach money management, parents should not use it as a way to punish or reward their child. Parents have differing views regarding whether a child should do work to earn an allowance. Consider giving your child a base allowance, apart from assigned chores, and paying “extra” for big chores. This will provide a steady dollar amount your child can plan for as you discuss such topics as saving and how to shop to get the most value for that money (see money exercises box). Most children will make mistakes. Spending the entire allowance the first day is typical. Don’t bail your child out. Instead, discuss how the allowance might be spent next week. Start teaching your child about interest. For every dollar saved, add a dime at the end of the month. Keep the dimes in a separate jar so the growth is visible. When your children are older, help them open a savings account and establish short, medium, and long-term savings goals. Finally, introduce your child to where money comes from. Take your child to your bank or credit union to make a deposit. Explain that the ATM you use is simply using the money you’ve already placed in the bank. When you pay with a credit card, explain the card is permission for the store to charge your credit card account. Make sure your child understands that you must pay the money back. When you pay bills, show the statement to your child and say something like, “Remember the t-shirt we bought for $10? Here it is on the list of things I have to pay for now.”
Need More Resources?
Make sure to visit the other sections dealing with credit management: