Teaching children to handle money responsibly should begin when children are young. Ideas about money are learned young and will last a lifetime. Teaching children to earn, budget, and save money is a skill that is critical for their financial future. Teaching should begin young and be basic and become more complex as they grow.
In early childhood, children tend to believe that items they want and need just appear. As infants and toddlers, there is no reason for them to believe otherwise. As children begin to get older and are able to communicate better, it is important to start showing them that things cost money. Make a point to pay with cash for purchases. Let the child hand the money to the cashier, and get the receipt or change in return.
This shows the child that money is exchanged for other things. It is not important at this age for them to understand that a car costs more than eggs. Most kids don’t have an extensive enough math understanding to grasp this concept at this age.
By age six, most children have started kindergarten, and are beginning to learn about “greater than” and “less than.” They have a basic understanding of numbers. At this stage, it is important to begin showing the child that more valuable items cost more money to buy.
While this may seem extreme for a six-year-old, it is not outrageous for a seven or eight-year-old. Children at this age will be seeing a lot of things they want. If a parent buys them everything, they do not learn about budgeting or saving, they simply learn to ask, cry or whine until they get what they want. Instead, savings and budgeting should be introduced.
By age eleven, most children should understand the basic concepts associated with earning, budgeting, and saving money. This is a good time to start teaching children more advanced money management skills. If a child wants to borrow money, take the opportunity to explain how credit works. Providing a strong financial education to children is important for their future. Healthy attitudes about money, along with an understanding of what credit is and how it works, will lay the groundwork for responsible money management in their adult lives.