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Teach Your Children About Money

© Michelle Hogan

Teaching your children the basics of money management can be an intimidating task, especiallly if you are not very sure about your own money handling skills. Taking a simple approach, one that you perhaps even start following yourself, can give your children a solid foundation from which to build a lifelong common sense money approach.

So, when do you start teaching kids about money? Well, as soon as they stop wanting to eat it! Even 3 and 4 year olds like to "pay" at the store or press buttons at the ATM machine. Take these opportunities to explain how you gave the money to the lady at the bank and now you have money to take out.

Children this age can also start with coin identification. A really interesting project is trying to explain why a nickel is worth less money than a dime even though it's smaller! Don't make it too complicated, though. Eventually your child will realize that he can get two gumballs for the smaller coin and only one with the bigger coin. By the time your child reaches the 5 to 7 year old range, the idea of saving can be introduced. There have been many discussions about whether or not it's better to give an allowance or pay for chores. To be honest, we have done it both ways. Frankly, I do not like the idea of giving a child money simply because he is alive, so I tend to stick with the pay for chores approach. I don't pay for all chores, however. Doing dishes is a given, help the household chore, as is cleaning one's room or picking up toys.

However, cleaning out the garage or raking leaves does not have to be done all of the time, and I am willing to pay for such chores. An allowance can be nice, but I do not want to give my kids the impression that there will be money available to them all the time, particularly when they grow up. On the flipside, I pay for many things for my children, friends' birthday presents, and the like, so they do not have to budget for such things and can use the money they earn for things they know I will not buy or do not have the budget for.

A jar system is an excellent way to teach kids about saving. You can use two or three jars, depending on your approach. Everytime your child receives money, either by allowance or by work, he would divide it up into two or three equal parts. One jar is for the money that can be spent right away. The other jar(s)is for saving. Place a label or picture on the jar with the amount or date you are saving to or the item you are saving for. You can surprise your little one once in a while by adding a few pennies worth of "interest" to the long term savings, as a way to show that money can make money too.

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