Money Talks: Conversations with Kids

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Your children are growing up in the age of consumerism, and they will start noticing money at an early age. When they’re young, money is an abstract concept: it’s green paper handed across counters and registers, or plastic cards that adults swipe in machines that let them buy things. But as soon as kids start asking questions or showing interest in how money works, it’s time to teach them a few basic concepts.

It’s not always easy to explain savings, budgeting, and bargain shopping to a 5-year-old, but if you incorporate lessons into everyday life, your children will start to understand the principles of good money habits that will shape them into financially responsible young adults.


Give Them an Allowance

The allowance question is an ongoing debate that will never find a universal solution, but the most important thing is to find a method that works for you and your children. Allowances can be one of the easiest ways to teach them about money management. Whether you attach it to chores, hand it out with no strings attached, or come up with a list of “super chores” they can do to earn money, use their allowance to practice saving, budgeting, and to teach them where money in the “real world” comes from.


Take Them Shopping

When you go shopping with your child, take the time to show them price tags and coupons. Explain why you buy the brands you do, and have them help you find the best deals. When you get to the register, instead of letting them ogle the candy display, have them count out the proper change or hand the money to the cashier to give them a hands-on learning experience.

If you have older children, have them help you shop for more complicated things. When you call for auto insurance quotes in Calgary, have them help you find the best deal for the best price. Have them compare online deals to the prices in store, and include shipping expenses and the cost of gas in your calculations. Get your children involved in family purchases, and they will begin to understand the value of wise spending.


Open a Bank Account

Most banks won’t have a problem with your child opening an account as long as you co-sign. Help them start their own bank account, and then make regular trips to deposit money so that they can see the gradual increase in their account. Show them how interest and savings work. Make sure you let them withdraw money occasionally so that they’re not just depositing money into the unknown—children will lose interest in the abstract. But if they can see the numbers on their bank slips go up and down, they’ll start to grasp the idea of saving and spending.

If you don’t feel comfortable with your child having a bank account, try the same teaching method with a piggy bank instead.


Let Them Borrow Money

If your child wants a specific toy or game desperately but doesn’t have enough money saved up for it, consider letting them borrow money from you to pay for the item. Having them save until they have enough to pay for the item themselves is one way to teach them good money habits, but you can also take the opportunity to teach them about loans. Lend them the money and then have them pay you back with their allowance or money they earn from extra chores. Set up a plan with them before you let them purchase the item, and make sure they understand that getting the toy now means their income will be reduced for the next few months until they pay you back.

Be careful—you don’t want your children to learn that it’s ok to borrow money anytime they want (when they get older, “toys” will become boats, RVs, expensive cars, etc.). Make sure you use this method as a one-time lesson about the consequences of borrowing money, not as a guaranteed way to get what they want.


Let Them Make Mistakes

If your child wants to buy a toy that will either break easily or won’t bring them the satisfaction they think it will, let them. If you let them make small mistakes now, they’ll be less likely to make bigger mistakes in the future. Take the opportunity to teach them why such-and-such a purchase was an unwise decision, and help them see what a better option might have been (saving their money, buying a more versatile item, saving to buy a more expensive, resilient version). They will learn to spend their money with the future in mind rather than on a whim.

It is never too early to start teaching your child about money. Make sure they know where it comes from—it doesn’t grow on trees, and machines don’t just spit it out when you want to buy something. Teach them how to save, how to find good bargains, and how to be frugal and savvy with their limited income. Make the abstract concrete, and turn your mini-consumers into mini-financial gurus instead.

About the Author

Melanie Hargrave is a wife and homemaker whose family is her pride and joy. In addition to spending time with her husband and daughters, she loves reading, blogging, and giving her children opportunities to learn by teaching them life lessons from companies like Anthony Clark Insurance.

Updated: March 27, 2014 — 12:35 pm