Whoever fully understands all the subtleties of personal finances and nuances of advanced economics, please raise your hand. If you raised your hand, you’re a liar. You also probably look pretty silly raising your hand while reading this article.
The fact is: even the most financially savvy adults can still learn new things about money all the time. With this being the case it can be tough to know where to begin when it comes to teaching your children the value of money. We all probably vaguely remember some things about an allowance, a piggy bank, and some warnings to “not spend it all in one place.” But beyond this, most people figure out the important things about money the hard way – in early adulthood.
Learning the value of a dollar is a critical element of development for children
To a certain degree, this will always be the case, but finance has certainly changed a lot since most of us were kids. An inflation calculator will show you that the value of a dollar has significantly decreased since those days, and that trend will only continue as our children reach adulthood. If you need some pointers on how to help your children understand this value, the information below can provide some beneficial tips for starting your children on the right path financially.
Explaining How Money Works
Your children may be able to fully grasp the concept of money as an intrinsically valueless thing that society has agreed is valuable. Starting off, he just needs to learn that money is something to be used in exchange for things he wants.
Just as importantly, he needs to understand that he only has a finite amount of money, so it is impossible to have everything he wants. You need to take any chance you get to show little examples of this to your child. Teach him that the ATM is not a bottomless money-printing machine. Like a piggy-bank for adults, it is just a container for money that you already have. Also, show him examples of the things that he needs that cost money, like groceries and clothes, so he can relate it to necessities and not just desires.
Helping Them Learn for Themselves
As is the case with most things, children can learn the basics of money best by putting it into action for themselves. Give your child a small allowance and help her to spend – and save – her money responsibly. Provide a clear container in which your child can save her money and visibly see it add up. When she wants to buy something, let her count out the correct amount and give it to the cashier herself.
You may need to let your child make some of their own financial mistakes as well. If she wants to blow all of her money on candy and individual trinkets early on instead of putting her money together to buy something worthwhile, let her. The hard part is: when she turns on the puppy dog eyes and begs you to buy the nice toy for her anyway, you cannot cave. Doing so would defeat the entire purpose of the exercise.
There will always be new opportunities to teach your child the value of a dollar, and you should stay on the lookout for them. The best thing you can do is combine verbal lessons with visual reminders and helpful experiences. While nothing will ensure your children’s financial success in the future, you can do your part to set them on the right track.