Helping kids understand money - the flip side of the coin
Most kids think money magically spits out of a hole in the wall. Teach your kids about $ with these kid-friendly money tips.
We teach our kids that money rules the world everyday. How many times do we inadvertently give them this message? “I can't stay at home to play with you. I have to go to work to get money.” You can't have that toy, it costs too much money.” “Oh no, not another letter from the school. I bet they want more money.”
While most kids know about money, it's important they also understand why it's a precious resource, where it really comes from and how to manage it.
Kids need to know that money has to be worked for, that it doesn't grow on trees or sprout in magic ATM machines! Try these tips:
- When you withdraw money from an ATM or use Eftpos at the supermarket, explain to your child that the money is coming out of your bank account - not some limitless supply.
- Talk to your kids about why mum and dad has to work to earn money. Explain that it's money that puts food on the table.
- Involve your kids in family conversations about money and bills to familiarise them with the concept of household finance.
Once your kids have an understanding of money and where it really comes from, you can start teaching them about valuing it and spending wisely. Try these tips:
- Show kids the value of money by explaining all the things $2 can buy next time you're at the shops.
- Teach kids how to compare prices and shop around. Use things that they like as examples.
- If you're giving pocket money, give a combination of notes and coins to familiarise kids with the different denominations.
- Encourage your kids to save by starting a savings account in their name or giving them a piggy bank to fill. Help them to identify their savings goals and talk about how they're going to reach them. To make it fun, encourage small children to draw pictures of what they want to save for.
- Talk to your children about the difference between needs and wants and how to budget accordingly.
- Allow your child to hand over the money to pay for things or press the OK button on the EFTPOS machine to get used to handling money.
The great pocket money debate
Pocket money is a touchy subject among parents but you might find that your kids raise it with you before you've even decided which way to go! Think about your values, what you hope to achieve with pocket money and explain your thinking to your kids before you open the pocket money floodgates.
Questions to ask yourself
Before you even contemplate giving your child money of their own, ask yourself these questions to help you work out some boundaries and pocket money house rules.
- Are you prepared to pay your children for household chores such as washing your car and picking up toys? Or are household chores responsibilities that shouldn't be rewarded financially?
- Is it ok to withhold pocket money as a consequence of bad behaviour?
- Is pocket money a reward for good behaviour?
- Is your child allowed to spend their money on anything they like, e.g., chewing gum, or plastic guns even though you're opposed to these?
When to start?
It's never too early to open a savings account in your child's name. But when is the right time to give your child pocket money or to handle real coins at the local shops? Well, you know your child best but if they can't calculate how much a $1.50 bar of chocolate and a $2 ice-cream will cost, or how much change they should receive from a $10 note, it might be too early to make them responsible for real-money situations!
Find more on Kidspot New Zealand.