Volume 3, Issue 8
Your Children and Money Management
A four- or five-year-old child may seem too young to grasp the concept of money management, but even at an early age, children see that money buys things. Simply waiting in a supermarket checkout line provides ample evidence of “kiddie consumerism.” Therefore, it is important to begin as early as possible to help your child understand the power of money by allowing him or her to deal directly with money matters.
The following suggestions can help your child begin to understand the concept of money management:
- Include your child in financial transactions. If possible, have your child with you when you cash your paycheck, pay bills, and make regular deposits to your savings account. Explain comparison shopping at the grocery store as you choose cereals and snacks. Include the whole family in decisions about whether to purchase significant items today or put the money away for a vacation or trip next summer.
- Give your child an allowance to manage independently. A weekly allowance given with the understanding that certain chores are part of being a contributing family member can help provide a learning opportunity. Provide enough for necessary expenditures (e.g., school lunches) plus some discretionary funds. Discuss the pros and cons of spending the money in different ways.
- Create opportunities for your child to earn extra cash for special events or personal items. Discuss the difference between whims, wants, and needs, and give your child regular opportunities to save and see how savings can earn money in the form of interest.
- Demonstrate the importance of giving. It may be difficult to show your child the effects of poverty, but it can help teach two valuable lessons: the importance of money and how money can be used to help others.
The saying, “children learn what they live” is true not only for instilling moral values, but also for arming a child with the necessary tools for sound money management. Teaching your children the fundamentals now may help them build a financially independent future.