Teaching Kids About Money

Money Management should Start from a Young age

Nov 27, 2008

Children should learn the importance of money and good money habits from young.

Everyone loves and needs money. But not everyone knows how to manage money wisely. While schools are great places to learn, they usually don’t put much emphasis on money management. That explains why even some of the smartest kids in school never make big bucks!

So it’s pretty much up to the parents to give money lessons for kids. If they start learning about saving, spending and making money from young, they are more likely to manage their finances successfully when they grow up. Here’s what parents can do to teach their children to be money-wise according to different stages of their childhood.

Kids in Preschools and Kindergartens

Between the ages of four and seven, children start to understand money’s worth in material things. They know money can buy ice cream and toys. Parents can teach kids in this age group that money has to be earned and that means there will only be money if dad or mum or both go to work. It’s also a good age to teach them to save money. Give them a piggy bank to start the habit.

Parents should also teach them that once money is spent, it’s gone. And that’s why dad and mum have to keep working so that the family will have enough money to spend. It’s also a good time to introduce the concept of loan – what is borrowed must be paid back.

Kids in Elementary Schools

Children from eight to 12 will be able to understand the importance of money and how having enough and more money will make things easier for the family. Teach them money is essential to pay for the house, family car, utility bills, school fees, food, clothes, piano lessons, ballet classes, etc. By this age, they will have known that money has to be earned and that some jobs can be hard and tough. They will be able to appreciate their parents’ hard work to keep the family going.

Opening a bank savings account for a child this age is a must although a piggy bank still comes in handy to save loose changes and pocket money. It’s a good time to introduce the concept of interest in savings accounts. They will not only save money but they will also earn some money just by putting money in the bank. Many banks offer great interest rates and bonuses for children’s savings account. So make use of these.

Children in this age group can also learn to compare product prices and quality. They will quickly learn that they can’t have all and have to choose one product over another. Being able to make purchasing decisions based on comparative costs and qualities will make the child a smart shopper.

Kids in their Teens

Money becomes really important to kids when they hit their teens. They will want to spend money going out with friends, for movies, sports events and presents for special occasions. Some teens will be able to grasp the concepts of investments and making more money through money.

To help teens save, parents can deduct pocket money given to them and put it in their savings account. It’s a good idea to buy shares in a company for them and track the share performance together. It’s also the right time to explain the concept of managed funds where money is pooled with that of several other investors so that the fund can buy a wide range of assets to maximize returns.

Some teens will be more enterprising and ready to start making their own money. If your child shows the desire, enthusiasm and talent to start his own little business, give as much guidance and encouragement as possible. Babysitting, car washing, house cleaning, being a companion to elderly people, delivering leaflets/newspapers, lawn mowing and dog walking are some money-making ventures that teens can try out.

Money lessons for kids should begin early in life, from before preschool right through elementary school and high school. As children grow older, introduce more sophisticated money saving and money making concepts to them. Some older children may even be ready to make their own money if they are guided and supported adequately by their parents.

The copyright of the article Teaching Kids About Money in Kids & Money is owned by Wei Yin Wong. Permission to republish Teaching Kids About Money in print or online must be granted by the author in writing.