Teaching your young children to be money smart

The best way to teach young children to be money-smart is to allow them to have money to spend and save.  No matter how young your children are, you can place a value on things that they want. Teaching them to save for the things that they want, is one of the most useful lessons you will ever give them.

An allowance is one way to begin the lesson. Children need to understand that money is not freely given except as a birthday or Christmas/Hanukkah present. If they want money at other times of the year, then they need to learn the concept of payment for services rendered.

The first step in this concept is teaching the value of each coin. Then apply this to some items they will want to purchase. Explaining that it takes four quarters to purchase a candy bar or three quarters for a small bag of potato chips will teach them to think of money as a means to an end.

The next part of the lesson is assigning tasks and setting a money value on them. Even the smallest child can understand that if they pick up their toys they will receive a quarter and with that quarter they can purchase a large gumball in a machine.

With small children, you have to be prepared to give instant gratification since they are not ready to understand the value of patiently saving to achieve a goal. It is easiest if you know what it is they want and have it handy so that after they have earned their money you will be able to provide them with their desired purchase.

A savings account is one of the most important things that you can give to your children once they are old enough to understand the value of saving. Once they reach the age of five or so, they are able to have a set allowance for the week and understand that for larger items, it may take more than the amount that they earn in one week. By this age, they are ready to know about paper money. Taking your child with you to the grocery store and using cash money to pay is an important lesson.

A visit to the local bank to open a saving account is also a valuable lesson. A good time to do this might be after a birthday when they have received a cash or check gift. A passbook may almost be a thing of the past but for children, it helps them to watch their money grow.

It is never too early to teach your children to be smart about credit as well. You might want to let them purchase something that they want with a loan from you. You can help them to make payments and if you want to be realistic you can charge interest. You can even give them an old expired credit card so that they understand what you are doing with yours when you use it.

In the world we live in today, it is important that even the youngest children learn the value of money. You can teach your children to be money-smart, they will thank you for it later.