Teaching Your Child About Money

By: Dr. Caron B. Goode, www.acpi.biz

We all know that money cannot buy happiness. Nor is it the root of all evil. Learning how to manage money, however, is important to ensuring a sense of security and self-worth. No matter whether your child wants to be a stockbroker or a school teacher, learning how to manage money gives them the key to financial success. A success that comes from knowing she has the skills and the knowledge necessary to take care of herself.

Six Steps To Teaching Money Management

Introduce Money. Young children take pride in learning how to count. You can use this skill to introduce them to the concept of money. Gather pennies, nickels, dimes, quarters, and one, five, ten, and twenty dollar bills. Show your child how money adds up by putting coins and bills in groups. Show her that five pennies equal a nickel, five nickels equal a quarter, four quarters equal a dollar, and so on. Also, play lesser and more than games. Ask your child which is more, a one dollar bill or a five dollar bill? Then ask which is worth more a five dollar bill or a ten dollar bill? Eventually, your child will begin to comprehend the concept of money in terms of numbers.
Practice Spending. Once your child is familiar with the concept of money and worth, put that knowledge to the test. On a trip to the store, pick out an item and show your child the price. Ask her how many dollars and coins she would need to buy the item? Over time, she will be able to equate numbers with money and money with purchases.
Allowance. When your child understands money and its purpose, then it is time to start making her financial lessons more concrete. Decide on an appropriate allowance for her age. Also decide what you expect for that amount. It is important children learn that money is earned, so age appropriate chores should be part of receiving a weekly allowance. So should consequences for not completing those chores. No chores, no allowance. This will help motivate your child. It will also introduce her to a good work ethic and give her an opportunity to feel good about herself. Everyone is proud of a job well done.
Saving. It is not enough to give your child an allowance. You need to show her how to manage her money, starting with saving. Explain to your child there are two kinds of saving. There is saving for something you want now and there is saving for what you will want in the future. Tell her that both types are important and need to be planned for. You should decide how much of her allowance she puts into short and long term savings. More than likely, she will easily grasp the concept of saving for a toy she wants. Saving for the future might be a more difficult point to drive home. This might be accomplished with storytelling or make believe. Ask her questions about what she wants when she grows up. Ask her if she wants to go to college, drive a car, or buy a house. Then explain that all these things are big expenses and if she starts saving for them now, she will be able to have them when she wants them later. Don’t worry if she does not seem to comprehend this at first. Just get her in the practice of saving. Eventually, with maturity, she will understand and by that time she will be well on her way to saving for her future.
Sharing. When children are young, it is hard for them to think about helping people they don’t know. But like saving for the future, in time they will understand the importance of charity. Like saving, it will be up to you to determine how much of her allowance should set aside for charitable causes or donations. Help her pick out which causes are important to her and explain how her money can help.
Open a Savings Account. Many of you may have already done this for your child. If not, now is the time. Take your child to the bank with you when you open the account. Let her take part in the process, and after you are done, celebrate with a small treat. Let her know she is taking an important step, and set up regular times during the month for you to go to the bank together. After she makes a deposit, let her look at her bank book. Let her see on paper how her money is growing and she is reaching her goals.

Dr. Caron B. Goode is the founder of the Academy for Coaching Parents International, a training and certification program for parent coaches. In addition to duties with the academy, Goode is the founding editor of the website InspiredParenting.net, and the author of eleven books, the most recent of which is Help Kids Cope with Stress & Trauma, which includes several chapters on he use of storytelling strategies. For more information on The Academy for Coaching Parents International or to sign up for academy announcements, visit www.acpi.biz .