Teaching Your Child To Manage Money

Early lessons go a long way to developing positives habits and attitudes later in life.  This is as true for money management as it is for anything else. Arming your child with the right attitude and necessary skills at the right time will give them a great advantage over children who have had no experience with money, therefore little understanding of the whole concept of earning, saving, spending and sharing money.

Not so long ago it was only the man of the house who managed all the expenses.  Money was wrapped in a shroud of mystery and was not discussed in polite company and certainly not at the family dinner table. Times have changed, women, as much as men, both earn and spend money.  Children are exposed to a huge amount of marketing which tells them how they desperately need the very latest toy and gadget. It is vital that they are very clear that money does not grow on trees and if we spend on this we may not be able to spend on that.

Educating, motivating and empowering children to become savers and investors enables them to keep more of the money they receive and be able to do more with it.  This is a life skill that is often not taught to young children.

Talk to your child about money and how it works.  

When you are shopping you can look at two similar items and discuss which one you will buy, taking into consideration the cost. Children from a young age can become quite savvy consumers and can begin to recognize value from money.

If you are paying by credit card talk about how you will actually pay that later from your bank account when another bill comes. The ERP gantries fascinate my son.  He is amazed at how money gets ‘sucked’ off my cash card each morning.  It is important for children to understand how we can spend money without physically handing over notes or coins to another person.  This is becoming more and more common, and easy to lose track of!

Encourage your child to save.

  Every child should have a piggy bank.  My 3 year old loves to see her coins accumulating in the piggy bank.  Whenever we go on holiday we empty our little family of piggies and change all the money to spend when we are away.

Children can learn a great deal once they start getting an allowance.  This works from about 6 to 8 years old.  Children from Primary One need to manage money enough to buy from the school canteen and stationary shop.  An allowance where they can decide what they wish to do with it is another way to help them think about money and make sensible decisions. It takes practice to understand the concepts of budgeting, saving and spending.

One way to help your child develop healthy money habits is to decide whether to save, spend or share their regular allowance or money given on special occasions.  You can even buy piggy banks with different compartments. Savings can go towards a goal that has been set.  Spending money can be used quite freely, as long as there is enough there and sharing money can be used for birthday presents, gifts and to give to a charity of your child’s choice. It is important for children to understand that many are less fortunate than us and their survival is dependent on the kindness and generosity of others.

Encouraging children to develop the habit is important.  One way to do this is by offering to match what they save, this provides an incentive to save.  In time the benefits of saving will become more clear but keep in mind young children do tend to be impulsive and delaying gratification can be hard!!

Once children are older and have grasped the concept of ‘spending, saving and sharing’ it is an idea to begin to maintain a record of money spent, saved, or shared.  Keeping 12 envelopes, 1 for each month of the year with receipts and notes on spending in each provides a clear system to do this.

They say money can’t buy health or happiness.  However if money is well managed in business and in the home then stress can be considerable reduced and that has a very direct impact on health and happiness. As all parents want their children to have the very best shot at a happy, healthy and successful life it is important to teach these lessons as early as you can.

At chiltern house preschool, students are taught to learn how to be independent so that they can quickly pick up essentials skills like managing money when they go to the canteen in mainstream schools.