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Children and Money

January 15, 2008

You may find that your child is interested in money. She may have discovered that there is a difference between the sizes of the coins she has in her piggy bank, or that some money is paper and other money is coins. There are even times when mommy or daddy uses that little plastic card to pay for things. Here are some tips for teaching your child about money and how to save it:

• As soon as children can count, introduce them to money.
• Help children learn the difference between needs, wants and wishes. This will prepare them for making good spending decisions in the future.
• If you give your children an allowance or income, give the money in denominations that encourage saving. For example, if the amount is $5, give out five $1 bills and encourage at least one be set aside in savings.
• If you are able to open a savings account in your child's name, take him or her with you to the bank when you open the account. Beginning the regular savings habit early is one of the keys to savings success. Don't refuse them when they want to withdraw from savings for a purchase or you'll risk discouraging savings all together.
• Take children with you to other stores. Explain how to plan purchases in advance. Make price comparisons and also check for value, quality, reparability, warranty, etc. Spending money can be fun and very productive when spending is planned. Unplanned spending however, usually results in 20 to 30 percent of our money being wasted because we obtain poor value with many purchases.
• If you are using a credit card, at a restaurant for example, take advantage of an opportunity and explain to children how to verify the charges, and how to calculate the tip. Explain also how and when you plan to pay for this and other charges children have observed.

Adapted from 18 Ways to Teach Children or Grandchildren the Value of Money by Paul Richard of the Institute of Consumer Financial Education.

For More Information

• Institute of Consumer Financial Education
• Family Education
• MarketWatch - Teaching Your Child to Invest

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