Ways to teach children about the value of money

Instilling a financial foundation and understanding the value of money from a young age will teach children to become knowledgeable individuals and make smart choices about money.

Explain how money works

Without understanding money, children think that milk is available in plastic bottles, fruit can be picked up from the grocery store, and money can be taken from ATMs or swiped with a credit card without limit. Therefore, it is important to introduce paper money to your children so that they understand how money and spending works. Teach your children that ATMs and credit cards are not ready-made stores of money, but are linked to your bank account and you can only withdraw what you have.

Basic math skills

Even if your child understands the concept of money and its different denominations, he or she will not be able to practice without basic addition and subtraction skills. Therefore, you can give your child small change, teach them how to buy things, and get change when going to the supermarket. Gradually, this will be a good skill for your child when using money.

Parents can also give their children a small amount of money, depending on their age, so that they can gradually learn how to spend and save if they want to buy something.

Instill the value of earning money

Most parents are in favor of giving their children some pocket money, but not many parents instill in their children the value of earning that money.

When children earn money rather than being given it, it is more meaningful because they will have worked hard to earn it and they will not take it for granted. Earning money for simple tasks like cleaning the house or washing dishes, then saving that money to buy something is also a good lesson in delayed gratification and often prevents children from growing up to be overly materialistic.

Not meeting all of your child's needs

Depending on your child’s age, you can introduce them to common financial expenses that families have to pay for, such as tuition, utilities, medical bills, groceries, and insurance. This will help your child develop a broader perspective on why money needs to be spent wisely.

Because earning money is not easy, sometimes parents cannot meet all the needs of their children. Therefore, in some situations, you can say "No" to refuse your children's requests. Having some disappointing experiences as a child and practicing patience will help children grow up, instead of not understanding the importance of delayed gratification and budgeting.

Teach your child basic money skills.

Encourage your child to follow the "spend half, save some, share some" rule. Decide together what the ratio should be, depending on their age. Children understand best when they have a visual lesson, so parents can start simply by using three jars or piggy banks, one for saving, one for spending, and one for giving. The saving jar will grow slowly, but the spending and giving jars will fluctuate more. This way, children understand the importance of saving for a rainy day or unforeseen situations.

It is also important to remember that saving towards a certain goal is important for motivation, so parents should monitor how much their children save and encourage them to plan ahead for special purchases. If your child is old enough, consider opening a savings account in their name.

Spend wisely

One way to teach kids about smart spending is to take them to the grocery store. This is a great way to demonstrate the power of choice and not be swayed by the tempting pictures on the packaging.

If you can teach your child to choose wisely about one product over another and make value-based decisions that make their money last longer, they will be more likely to prioritize and spend on more important things instead of frivolous spending. They will also grow up to be happier and more financially independent.

No "guarantee" for children

Just like adults, the sooner children realize that their decisions have consequences, the better off they will be later in life.

Parents need to teach children that once they buy something, they may not be able to get a refund or exchange and that they have to accept what they bought if they don't have enough savings to buy something else.

As a parent, you will be in a dilemma, especially when you see your child sad, but do not bail them out of the situation and give them money to fix the situation. Once they have learned that lesson, it will be much easier to make wise choices next time.