Teaching Children about Money

This blog was presented on The Modern Parent segment of The Rhode Show. Click here to watch!

As adults, we all know how important money is to everyday life. Having skills to balance your bank account is something that will benefit you forever and will ultimately strengthen your quality of life, no matter how much money you have. Whether we have an abundance of it, or not much of it at all, we have to think about it numerous times a day. If you really think about it, money is probably one of the things that an adult has to think about the most often – paying bills, buying food, gas, etc., everything that you do as adult, even something that is actually free, costs some form of money.

According to Forbes magazine, adults don’t know nearly as much about balancing money as they should, and much of the reason is because schools don’t teach enough about it. As parents and caregivers, however, there is a lot we can do to teach children about money early.

Click here to watch our segment of The Modern Parent where we presented this article about teaching children about finances.

• Why is it important to teach the concept of money to children?
As early as preschool, children understand what money is. According to the University of Cambridge, a child’s money habits form by age 7. The earlier a child understands that you can’t always get what you want, when you want it, and you need to save, the easier it will be when these children are in college and beyond. Starting to teach children early about the value of a dollar will help the next generation with their spending. Thinking about our credit card debt, foreclosed homes, and massive student loan debt from this generation, it’s important to start teaching kids early.

• How do we start teaching? What concepts can you instill at an early age?
Without opening up a bank account and physically showing a child how to balance a checkbook, there are still many money concepts you can teach children early that will help them later on.

1. The concept of, “you can’t always get what you want.”  It’s important to start early when it comes to buying for children. Let children know when you are shopping that today is not going to be a day they receive a gift, and they will have to wait. Helping children understand early that every time they walk into a store, they will not necessarily receive a present is important for them as they get older.
2. Allow your child to help you with choices at the market.  As they get a little older, allow them to help you make choices. Give them 5 dollars and ask them what fruit or vegetables you should get for the family. Explain to them that you might be able to buy something on sale and get more of it, or something not on sale and get less. If children can help you and come to these money decisions with you, they will better grasp it when they have to do it on their own.
3. Start with an allowance early. The idea of an allowance is an important concept for children as they grow – if you are doing it the right way. Give your child a list of things they can do, and if they do it, they will get a certain amount of money. If they don’t do it, they will not receive it – much like adults. If we don’t do the work, we won’t get our money.
4. As they get older, start them with banking ideas early. Many college students get thrown into the credit card, student loan and bank account world all at once. Work on things one at a time. Open a bank account early in high school and balance it with them. Talk to them about how they should only be using a credit card if they can pay off the balance at the end of the month and show them why. Show them the financial reasons behind college options – how the more expensive school will be more harmful in the long run.
5. Allow children to make small mistakes. It might be the easy thing to explain to your child why a purchase isn’t worth it – but let them make it and see it for themselves. Then help them learn from it. You might know that the purchase is ridiculous, or cheap, or too expensive -and you know they will regret it. Letting them regret it, however, teaches them not to make the same type of purchase again. 

Nicole Chiello is an Education Specialist at The Children’s Workshop. Nicole received a BA in Elementary Education and Psychology from URI. Nicole has been with the team for four years.  Before being a director, she was a school-age coordinator, as well as a substitute for the Public Schools. Her favorite thing about working with children is the guarantee that every day is different! Visit us at wwww.childrensworkshop.com .