Teach Your Child About Money In 4 Easy Steps

by Julia Guardione Updated on: May 23, 2019

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“Teach the children, so that it will not be necessary to teach adults.” Abraham Lincoln

Teaching a child takes patience, understanding, and creativity, but it is necessary for their success later in life. Studies show that children can start to learn money concepts as early as 3 years old. By 7 years old, they can grasp the idea of using money to purchase goods.

Step One: Teach them patience

Have you ever heard the saying, ‘Life isn’t fair’? Well, it isn’t. Instill in a child the necessity of patience in life. When your child is a baby, you feed them when they are hungry. When they are thirsty, we give them water. When that child grows up, it’s important for them to know that every want or desire is not received so quickly. Patience is important considering money at any age. It teaches a child in more ways than one.

  • I cannot have everything I want.
  • I cannot have everything I want at the time I want it.
  • When I wait, good things happen to me.
  • I don’t need everything that I want.
  • I should not spend everything I have at once.
  • I have to be disciplined with my money.
  • I have to live within my means
  • I understand what is important in life.
  • I will have money if I am patient.
  • I put off the things I want now in order to have the things I need later.

An easy way to do this:

The next time your child asks for a toy, tell them that you will think about purchasing the toy instead of purchasing it for them right away. Then, if you purchase it later, it is a welcome surprise. Try not to make a habit of always purchasing the toy, but remind them that the toys they currently own, are still working and fun to play with.

Step Two: Teach them to make decisions

Children spend the first few years of their lives believing that their parents make all the decisions. However, around 5 or 6 years old, they begin to realize there are options. This can be overwhelming for a child and cause them to make very slow decisions. Do I want the Superman action-figure or the Iron Man action-figure? The idea is to minimize the number of options and encourage them to choose one.

An easy way to do this:

After your child has saved a little money, take them to the store. They will surely be excited at the idea of buying whatever they want. Allow them to pick out a few items and then remind them of the amount of money they have and encourage them to make a decision on which toy they can afford and which is the most special.

pablo-3Step Three: Teach them that money has value

One of the most important lessons, is to teach your child the time-value of money. If you teach your child that all money takes time to acquire (i.e. patience) then over time, they will see that it does not grow on trees. This lesson will take them far in life, notably when they hit their teenage years and begin to make their own money.

An easy way to do this:

Purchase a clear jar for their savings. The clear jar will show them at all times how much or how little they have to spend. Instead of just telling them how much everything costs, have them take the money out of the jar in order to see how much they have to use and how much will be left if they spend it. This will surely teach them about budgeting.

Step Four: Teach them that saving pays off over time

Kids are notoriously impatient and immediately will want to spend what they have saved. Show them that you are saving and perhaps they will want to do the same. Get two clear jars and make sure they see you add money to it regularly. When they are a little bit older, teach them to deposit money into their bank account, and every month, review their statement with them. These financial lessons will pay off later.

An easy way to do this:

Instead of just giving your child an allowance, give them a pay rate for doing certain chores around the house. Then, give them ‘interest’ payments on their savings. Every week, remind them of how much more they have and encourage them to save it until it gets to a certain amount or until they can make one large purchase.

How are you teaching your child about finances? We would love to hear from you!

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About The Author

Julia Guardione

Julia Guardione is RateGenius’ auto refinance expert. She is a graduate of Texas State University and a lover of all things outdoors. She lives in Austin, Texas with her dog and cat. She’s always open to new ideas, so if you have any suggestions or questions, email her at pr@rategenius.com.

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