How do I teach my child the value of a hard earned dollar?” "I want that toy!" wailed three-year-old Amy at the shopping mall. "But Mom, everyone at school has the Nike sneakers - not these!" exclaimed nine-year-old Jeff. "Dad, if you just loan me the money for the skates I'll pay you back," promised thirteen-year-old Will.
All parents find themselves dealing with money issues with their children. This can be frustrating and even downright embarrassing. There are specific steps you can take to help your child learn that money is not unlimited, that it must be earned through work, and that spending it means making choices. You can help your child develop good money sense now that will last a lifetime.
How to Begin
By the age of three most children can identify certain coins, understand that money is used to make purchases at the store, and that money needs to be kept in a safe place. They're ready to learn the basics: saving, spending, earning and borrowing. As your child grows older, you can add information to these concepts.
The easiest way to begin teaching your child about money is one of the most effective: talk about it. As you make your own financial choices, involve your child as much as possible. A simple trip to the ATM can be an occasion to let even your toddler know that it is money you had previously put in for safekeeping. At the grocery store you can say out loud the price comparisons and explain that choosing name brands leaves less money for other purchases. If you pay with a credit card, explain that you will have to pay the company when the bill comes in the mail. In many of your daily activities you can teach your child the basics of money management
Spending And Saving
As you teach your child how to spend money wisely, it is just as important to learn to save. You might have your child put some of the money he has received (gifts, allowances and jobs) into savings, give some to charity, and allow her to spend the rest.
When your child is very young, a piggy bank at home is an easy solution. As soon as your child is old enough, set up a bank account. Some banks have special youth accounts. Ask if monthly fees are waived for children, if there are minimum deposits and what the interest rate is. Interest payments are an important benefit as it teaches your child that her money is earning more.
For some families, shopping with young children is a dreaded chore. Some children whine and insist on every treat they see, dissolving into screams of rage and frustration when parents say "no." Often parents wait with growing embarrassment hoping their child will get past the temper tantrum or become distracted or end the shopping trip as quickly as possible.
If this situation sounds all too familiar to you, there are a few strategies you can use to prevent a crisis. Talk with your child before you go into a store to establish clear ground rules on what behavior is expected. Make it clear that if his behavior does not improve, you won't take him next time.
If your child is old enough to have an allowance, you can suggest that this money be used for spending as she pleases. An occasional treat is fine but the key is not to make it routine. Meanwhile, stay calm and remember that you are helping your child by setting limits
Ages And Stages: Money Strategies
Preschool (Ages 3 to 6)
- set up a jar or piggy bank for saving coins and money gifts
- play make-believe store at home with real coins and child's toys
- play counting and sorting games with coins
- have your child help clip and save the grocery coupons
- have your child help you shop and compare prices at the grocery store
- let your child count the change at the store
Elementary (Ages 5 to 10)
- establish an allowance
- create incentives to save such as coupons and sales
- congratulate your child on finding a true bargain
- play the game of Monopoly
- allow your child to make her own purchases, count the change and get a receipt
- establish routine chores that your child must do without pay
- find jobs at home that your child can do to earn extra money
- loan your child money for an item and insist on being paid back in full
- help your child consider giving a portion of her earnings to charity
Middle School (Ages 9 to 14)
- help your child determine his expenses and savings, i.e. develop a budget
- start a bank account for your child (look for special youth accounts)
- match every dollar your child saves and puts into his savings account
- expand the list of possibilities of what your child can do to earn extra money
- develop a plan for buying big ticket items through saving, earning and borrowing
- have your child pay debts promptly
- determine consequences for late or unpaid loans
- have conversations about money and various careers
- expand on contributions to charity
For some parents, negotiating money needs on an as needed basis is preferred over giving children an allowance. For others, a regular allowance is a freedom from dealing with money and creates a powerful learning tool. It is one of the primary ways children learn to manage money until they get a real job. There is no exact formula to help you determine how much of an allowance to give. Much of your decision will depend on what expenses you expect your child to cover.
For many parents the real question is whether the allowance should be tied to doing household chores. An allowance may be based on the performance of chores, or it may be a gift, or a combination of both. Talk with your child and decide together what jobs at home are part of his responsibilities as a member of the family and are not tied to an allowance. You may think of other occasional jobs such as mowing lawns or babysitting or pet care for neighbors that you could offer your child to earn extra money. Be consistent and pay on time. Establish any rules on what your child is not allowed to spend money on and then let her be free to experiment with her allowance.
I Have To Have It
For many children the peer pressure to buy specific items "because everybody has it" is too much to resist. All too often these items are more expensive than the ones without the logo or designer label and your child's wish can exceed her allowance.
Although you can't buy something you can't afford or don't believe in, you can be sympathetic to your child's wishes. Listen to his request but be honest about your reasons for not buying the item. Help your child understand why you made your decision rather than just saying no.
If one item continues to be important enough to your child you can help him find ways to buy it on his own. You could loan him the money or make suggestions as to ways he might earn the money needed.
What We Can Afford
Sometimes a visual lesson can help your child understand something all your words can't. You can demonstrate to your child why all her requests can't be made by playing a money game.
For Younger Children: Help your child understand the value of money by entrusting her with a small amount in the store. You might start with five dollars and let her discover how much, or how little, she is able to buy.
For Older Children: Bring home one month's income in cash or use Monopoly money and divide it into piles for each of your monthly expenses such as rent, food, utilities etc. Your child may be surprised to see how little is left over for extras. She may also learn that the new bike she wants costs more than the food bill for the week. Stress that money matters are private and that not every family has the same amount of money. The finances of his family may differ greatly from those of his friends.
The Daily Parent is prepared by NACCRRA, the National Association of Child Care Resource and Referral Agencies.
© 2012 NACCRRA. All rights reserved.