I can't emphasize enough how important it is for kids to learn about money-not just what they can do with it, but also the best way to use it. There are so many opportunities for parents to point out simple concepts of how to use money to their kids. Teaching your kids how to be money smart is the first lesson on how to be successful in life.
Here are the three simple and fun ways to do that:
Teach your kids the concept of budgeting:
If you ask a five year old how many fingers they have on one hand, they're happy to tell you by counting 1, 2, 3, 4, 5 before telling you five. If you ask them how many on the other hand, they start counting again. They do this so many times that they start to get the concept of math. Learning math starts with the concept, and the same is true for learning about finances. I know some adults who don't know the concept of financial budgeting, and that's where their problems start.
You don't have to make it complex. You can make a game out of it. List five things they enjoy, like shopping for something they like, eating something they like, or going somewhere fun, with the cost for each one. Then give them enough money for only three of those five things. Explain to them that they have money for three, so they should select three - it can be all from the same category or different categories. Let them decide.
Later on, brag about them making the right decision with budgeting their money, so they can be proud of themselves for being money smart.
Teach kids about saving:
Follow the same game in #1 above, but give them a little extra - but not enough to buy or do the 4th thing on the list. They probably want to spend all the money and they will try to see how they can do it. This is the best time to teach them about saving. Tell them that saving some of their money is a wonderful and smart thing to do. Get them a jar or a piggybank of their own to keep their savings in, and encourage them to keep adding to their piggybank, or money jar.
Difference between need and want:
Make it a game again. For the duration of a month or a week, tell them that they only can buy things that they need and not want. Every time they want to buy something with their allowance, ask them if they want it or if they need it. Most probably they'll say they need it, so ask them to tell you the reasons behind their need and work with them to understand the difference between need and want. It's okay to buy things that you want and not need - most of us do, but it should be clear to know the difference in situations where our budget is tight. Believe me, a lot of adults don't know the difference, so it's a good lesson to learn at young age.
Here are the three simple and fun ways to do that:
Teach your kids the concept of budgeting:
If you ask a five year old how many fingers they have on one hand, they're happy to tell you by counting 1, 2, 3, 4, 5 before telling you five. If you ask them how many on the other hand, they start counting again. They do this so many times that they start to get the concept of math. Learning math starts with the concept, and the same is true for learning about finances. I know some adults who don't know the concept of financial budgeting, and that's where their problems start.
You don't have to make it complex. You can make a game out of it. List five things they enjoy, like shopping for something they like, eating something they like, or going somewhere fun, with the cost for each one. Then give them enough money for only three of those five things. Explain to them that they have money for three, so they should select three - it can be all from the same category or different categories. Let them decide.
Later on, brag about them making the right decision with budgeting their money, so they can be proud of themselves for being money smart.
Teach kids about saving:
Follow the same game in #1 above, but give them a little extra - but not enough to buy or do the 4th thing on the list. They probably want to spend all the money and they will try to see how they can do it. This is the best time to teach them about saving. Tell them that saving some of their money is a wonderful and smart thing to do. Get them a jar or a piggybank of their own to keep their savings in, and encourage them to keep adding to their piggybank, or money jar.
Difference between need and want:
Make it a game again. For the duration of a month or a week, tell them that they only can buy things that they need and not want. Every time they want to buy something with their allowance, ask them if they want it or if they need it. Most probably they'll say they need it, so ask them to tell you the reasons behind their need and work with them to understand the difference between need and want. It's okay to buy things that you want and not need - most of us do, but it should be clear to know the difference in situations where our budget is tight. Believe me, a lot of adults don't know the difference, so it's a good lesson to learn at young age.