In most families, MONEY is a forbidden subject to discuss with children. As a parent, don't you want to see them make smart financial choices? So, start giving them the ABC's of dealing with finances at an early age. In many cases, it can be hard to explain a stressful situation related to money. But sharing money woes with children is a better idea than keeping them in a hidden file.
Sooner is better. Introduce kids about money as early as possible, when they know how to count numbers. It will help them to make a decision in near future. Introducing them with coins, ATM machine, store, bank can be an ideal way to start a conversation about the usage of money. But, be careful - Children often swallow small objects such as small coins.
Parent's guide to teach kids about money age-by-age
1 Ages 2 to 5
Introduce kids about money as early as possible, when they know how to count numbers. It will help them to make a decision in near future.
Money lessons: Teach your kids about the importance of waiting for the proper time.
How to do:
Play coin identification game with your kids
At this age, they may start making choice between a penny, nickel and dime. This is too early to understand the value of money. They may enjoy the coin identification game with you for its different shape and color. Children often swallow small objects such as small coins. So, be careful.
Play store game with your kids
Built an imaginary shop with household things (cereal boxes, fruit, sponges, or paper towels) as shop items in your living room. Spend a fun time with your kids playing the game. Tell them how to wait in queue to buy a gift from store. Tell them, that you won't buy stuffs whenever you visit a store. It will help them to understand the value of discipline. Thus, your kids will develop his/her idea on exchanging money for stuffs.
Play piggy banking with your kids
Young kids will enjoy the ideas of piggy bank. Try to make them financially organized at this age. Teach them how to save money for future purposes. Encourage them to save money each time they receive gifts. Show them the process of saving and spending money. Give them three piggy banks labelled as for sharing, for spending, for saving. Instruct them to keep money in piggy banks equally. Teach them the following mantras. (a)Sharing piggy bank money for a person's need (to help friends, donation for good cause). (b) Spending piggy bank money for purchasing small stuffs. (c)Saving piggy bank money for an expensive stuff and for future purposes. Teach them how to set a goal for future. If they want to buy a teddy, then tell him/her to save money in piggy for a certain time. Do not fantasize them for expensive gifts at this age.
2 Ages 6 to 10
Money lessons: Teach your kids about the importance of money saving for future.
How to do:
Basic concept of banking
Make an outing to the bank with your kids.Tell them the importance of bank. Give them an idea about savings account and how to deposit money. Teach them how to decide on spending money. Tell your kids to not spend money constantly without saving it . Help your kids to know how money grows in a savings account, basic facts of interest.
Basic concept of shopping
Try to insist them to visit markets with some money to buy vegetables or fruits. Involve them in daily money related matters. If they make any mistake, try to show them the proper usage of money while shopping.
3 Ages 11 to 13
Money lessons: Teach your kids about the importance of comparison shopping and budgeting.
How to do:
Help your kids to identify the difference
Help your kids to identify the difference between a branded product and generic brand. Tell them, that pay money once you are sure about the quality of the products. They should know how to do justice with hard earned money.
Tell your kids how to set a long term goal
It is perfect time to giving concept of long term goals. Give them a brief idea on saving accounts and the benefits of compound interest. How they can make money from the interest of savings account as well as interest from past savings. Kids are interested to spend money instead of saving at this age. Kids at this age may fond of buying an expensive stuff . So, insist your kids to set a long term goal to get a valuable thing.
Tell your kids how to create a budget
Young kids are very much fond of allowance. So, tell them to set a budget using the allowance. Teach them how to do compound interest calculation. Tell them to read some useful site (investor.gov) to know about the investment more clearly.
4 Ages 16 +
Money lessons: Teach your kids about the importance of spending money responsibly.
How to do:
Give them a lesson on social responsibility
A young kid of this age wants to donate money to charity. So, motivate your kids to do and appreciate their approach. Tell them that giving money to charitable organizations is a big social responsibility.
Give them a lesson on using credit cards
There are many stored value cards (Visa Buxx or American Express Cobalt Card) for kids to pay for things without using credit card. You can give your kids such types of stored value card to get them an idea on using credit cards in future.
Tips for parents when giving money lessons
- Spend quality time with your kids during a difficult time. If you're facing money problems, try to make your kids understand that the situation will be manageable. Try to give them an explanation about an obvious change seen in your lifestyle.
- Always try to be decent with your kids. Be sure your kids have space to make a financial decision. Ask them if you really need to buy stuffs for attending a party.
- Encourage your child if he/she is interested to take coin collecting as a hobby.
- Do not put them in isolation in a difficult situation. Listen to them if they come with an idea on saving and making money.
Are you interested to share your own money story with us? Have you ever faced your kid's money related queries? I would really appreciate your opinion on this topic. Share your own story with us.