Teach Kids About Money

How do our children learn about managing money? The No. 1 influence on how children handle their money is their parents. They watch what they do and often copy their behaviors. Some may be positive, but often, they see a lot of credit being used and may not fully understand how real money is tied to it.

There are many important behaviors that children can be taught about managing money. Three principles we can teach our children are the importance of saving, spending/budgeting and giving. But before they have any money to save, spend or give, there needs to be a system for them to get money. This is especially important if they are not yet old enough to have a job.

Some families use the allowance system. This is basically just giving children money for no specific reasons. Often the amount of money they get will depend on their age. When using this system, children can still be taught the basic principles. Another system families often use is the “earn it” system. Children do age-appropriate chores to earn their money. Whatever system you decide upon the principles are the same. You just need to decide what works best with your family’s values. Either one is valuable in teaching children money management skills.

One way you can help children manage money is to have three clear jars labeled savings, spending, giving. You could also use three labeled envelopes. After children receive money, you will need to determine how much to put in each jar or envelope. You could divide the money evenly, or by percentages. Having the clear jars helps them see how the money is increasing each time they put more in them, but the envelopes are a good alternative.

When teaching children about saving, they learn about delayed gratification. They learn that if they don’t have the money saved, they should wait. This will help them in the future because buying things when you don’t have enough money leads to debt issues. If children learn to save at an early age, when they are older they will have a better chance to have the money they need when something arises.

Teaching saving principles can also help with goal setting. Teach children to set realistic goals based on their age. Some may be short term goals, others long term. Some children may be saving for a car or college while others are saving for a new toy. If these saving principles become habits, when they are older it will be easier to meet their goals.

Another principle is budgeting/spending. Help children understand that once the money is gone it is gone until you earn or receive more. Help them to determine how to spend their money. Do they need school supplies or dues for an organization? Teach them that if they spend their money on something that they want they may not have it for the things that they will need.

Help children identify the difference between a need and a want. Teach them they may need a new pair of shoes, but may want a new videos game or toy. Often needs and wants are confused and again may create debt issues. Learning to work within a budget, when they are young, will be helpful as they get older because when they begin setting up a budget for a household, the foundation of good practices will have already been set.

Finally, teach them to give. Helping our children to understand the principle of giving now will help them become generous adults. They may begin giving to a church, school or other organization. Or it may be a project of helping a friend or neighbor. You can never be too young to learn to be a giver.

Giving also helps them to be thankful for what they do have. They can learn to be good stewards over the money and things that they have.

Teach your children now to be good money managers. The payoff will be great!

Cheryl Kaczor is an assistant professor for West Virginia University Extension Services and is a families and health agent in Marshall County. She has a master’s degree in community health promotion from WVU and a bachelor’s degree in home economics from Rutgers University.