Teach Your Children to be Money Smart

Written By Krista Tannahill

Your children will learn from you how spending and saving decisions will affect their daily and long term life choices. Children are extremely observant with a tendency to mimic the actions of those around them. By demonstrating sound financial practices in your daily life you will help your children understand the concept and importance of responsible money management.

You can teach children at an early age about the importance of saving money and making responsible spending choices. Consider the following questions:

1. Do you frequently pay for purchases in front of your children using your credit card?

It is important for children to understand where money comes from and that there is a limited supply of money in each household. Credit cards and debit cards can give children an unrealistic perception of where money comes from. Ask your children where they think the household finances come from. You may be surprised by their answer. Common answers include “the money store” or “money tree”.

2. Do you discuss money with your children on a regular basis?

How often do you discuss money and financial planning with your children? Do they have a savings account or piggy bank to save money? Do they understand why they may want to save money rather than spend it right away?

Discussing money and fiscal responsibility with your children will help them as they start to save money and make purchases. Find out what they are spending their money on and how quickly they spend money when it is given to them. In depth discussions and open communication will help them find a balance between saving and spending.

3. Do you buy toys and treats for your children whenever they request it?

We all want to indulge our children every now and then with candies, toys and treats. However, if we indulge them every time they ask we are setting the wrong expectation and sending conflicting messages regarding responsible spending habits. Discuss with your children that there is a finite amount of money budgeted for household groceries and have them help you add up the cost of weekly or monthly grocery trips. Your children will soon learn the concept of responsible spending and the importance of budgeting.

4. Do your children have a weekly allowance?

Start your children on a weekly or monthly allowance as soon as they are able to say the words “I want!” It is suggested that you provide a dollar amount equivalent to their age. Once you start providing an allowance talk with them regularly about how the allowance is being spent. If they spend the allowance quickly and request more money take the time to discuss money management.

5. Do your children help around the household on a regular basis?

It is critical for children to have a sense of belonging and contribution within the family unit. Household chores are a form of responsibility that should not be tied in with the purpose of giving an allowance. Being part of a family requires everyone to contribute to the tidiness, cleanliness and general running of the household. And if you don’t get paid to keep the house clean then it makes sense that they would not be paid for every task they do within the household. When your children grow up and move out no one will be paying them to clean up their own mess!

The purpose of an allowance is to teach children about the value of money, how to prioritize and to instill a sense of fiscal responsibility.