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Teaching Children About Money |
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Birth of a Consumer: How to Teach
Your Preschooler About Money
The Approach
What You Should Know
Money Concepts to
Focus On
How Are You Doing? Take
a Test to Find Out
Stages of Development |
Birth of a Consumer: How to Teach Your Preschooler
About Money
How families use money can influence young children into
adulthood. At one extreme, children can become financially secure adults,
while at the other extreme, they can grow up to live paycheck-to-paycheck
in a state of constant financial anxiety.
Here are some ideas for helping your preschool-age child develop healthy,
productive financial attitudes and behaviors:
 Look
for the “teachable moment”
Learning takes place every day and does not require a classroom or a
formal lesson. Educators refer to the teachable moment as the time when a
child is open to a new idea. Be alert for your child’s questions and
comments that let you take advantage of her curiosity to teach about
money.
Ask “open-ended” questions
Questions that have single-word answers--“close-ended,” yes-no
questions--do not encourage further discussion. They force you to keep
asking more questions. Open-ended questions, which are less likely to be
answered with a single word, are more productive because they encourage
conversation. Instead of asking: “What color was the man’s uniform?” ask:
“How could you tell the man was working?”
Build on past learning
Children learn at different rates. There is no “right age” to teach any
particular money concept. Financial questions can come up at any time and
in any order. Whenever these topics come up, try to connect them with
ideas you have discussed with the child earlier.
Read together
Books can be a big help in explaining the often-puzzling real world to a
child. Read to your child daily and use the public library as a doorway to
his interests and for some great stories for preschoolers about money.
Play together
Play is one of the most important parts of childhood, during which
children try to mimic and make sense of the world. Playing grocery store
and other activities with children not only teaches them basic money
concepts, but also reveals what they don’t yet understand and might be
ready to learn.
Plan together
Involving children in planning for family events helps them learn to be
responsible for wise spending. A child who has some say in where to go on
vacation and what to do there is more likely to accept spending limits.
Set a good example
Let children see you doing the things you want them to learn, such as
making plans to save for a goal and accepting spending limits.
You’ll find a set of free activities you can use to teach a preschooler
basic money lessons at
www.creditunion.coop. Look for Thrive by Five: Teaching Your
Preschooler About Spending and Saving. You can download the activities and
other teaching resources at no charge. If you don’t have online access
from home, you can use the Internet from your local public library.
Copyright 2005 Credit Union National Association Inc.
Information subject to change without notice.
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Taking the time to teach your children
good money habits now, will benefit them in the future. Children who are
not taught about money end up paying the consequences later on in life.
Many parents don't talk to their kids about money because they think they
are too young, don't have time, or feel they don't have enough money.
It's very important that parents take the time to teach children about
money regardless of what their income may be and that they start at an
early age. Below are some helpful guidelines and suggestions you may
follow along with some activities you can use to teach your child the
ABC's about money!
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"The Approach" Based
on childhood experiences, many people tend to have different
feelings and opinions towards money. These experiences, values, and
beliefs will probably differ for each parent. It's important that
parents talk about these feelings and come up with an approach as to
how they will teach their children about money. Here are some
questions you should consider that should help you focus your
discussion:
* How
will we create an open environment in which our family can discuss
money issues?
* How
should our children receive money? Will we give them allowances or
use another method?
* What
are our family values and attitudes about money that our children
may be observing?
* What
do we communicate about money?
* How
will we structure learning experiences about money?
* How
will we deal with our children's differences in handling money? By
stage of development, special needs or personality differences?
* How
will we respond to the effects of advertising and peer pressure on
our children's buying requests? |
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What You Should Know |
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Before
you begin, you should keep the following guidelines in mind:
*
Guide and advise rather then direct and dictate.
*
Allow children to learn by mistakes and by successes.
*
Encourage and praise rather than criticize or rebuke.
* Be
consistent while taking children's differences into account.
*
Include all family members in money management discussions, decision
making, and activities as appropriate for their age.
*
Explain to children what they can and cannot do and the consequences
of violating the limits.
* As
children get older increasingly include them in discussions of
limits and consequences.
*
Expect all family members to perform unpaid, routine household
chores based on their abilities.
*
Express your desire to have things you can't afford. Children need
to know that parents say "no" to themselves, too. |
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Teaching children about money is more than just
preparing them for employment or how to save. It involves teaching
them the positive and negative meanings about money. For example,
children need to know that while it's nice to show people you care by
buying a gift, you can also show someone you care by actions and
words. There should be open communication between parents and kids
about feelings, views, and opinions towards money. This will help the
child understand that conflict does occur with money and that it
should be discussed within the family. In many circumstances a
compromise is necessary.
Children learn mainly through observation and
example. Through observation children learn much more than parents
think. Parents can add to this observational learning through
intentionally planned learning activities. As you teach your children
about money they will learn about responsibility, family values and
attitudes, decision making, comparison-shopping, setting goals and
priorities, and managing money outside the home. |
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Money Concepts To Focus On |
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When teaching your children about money, focus on
these money concepts: earning, spending, saving, borrowing, and
sharing. You can begin to teach most of these concepts when
children start to talk in sentences. Borrowing and sharing will
probably come at a later date, probably later on in elementary
school. They require the ability to understand math and other's
point of views. |
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Earning teaches:
-A
sense of freedom
-Financial independence
-Work standards and habits
-How to evaluate job alternatives
-Relationship of money, time, skills, and energy |
Spending Teaches:
-Difference and balance between wants and needs
-Opportunities for comparing alternatives
-Making decisions and taking responsibility for them
-Keeping records |
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Borrowing teaches:
-Cost of borrowing
-Borrowed money needs to be paid back
-When it is appropriate to borrow
-Consequences of buying now and paying later
-Structure of borrowing
-The idea of credit limits |
Sharing teaches:
-Good feelings for giver and receiver
-Helps other people
-Doesn't always require public recognition
-Obligations to give money to certain organizations, i.e. taxes to
the government
-Giving of yourself rather than giving money or gifts. |
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Saving teaches:
-Saving as a way to get what you want or need
-Identifies the "pay yourself first" idea
-Planning and delayed gratification
-Interrelationship of spending and earning
-Different purposes of planned and regular saving |
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This is an exercise designed to help you evaluate
what you are or are not doing to teach your children good money
habits for life. The stage of development of the child will dictate
how involved you get with the topics presented in the questions.
Use the development chart which follows to guide you in deciding
about the level of involvement. |
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Yes |
No |
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1. Do each of my
children have some money to manage without my interference? |
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2. Have I helped my
children set up a spending and saving plan? |
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3. Do I avoid using
money, as a reward or punishment? |
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4. Do each of my
children do some regular household chores? |
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5. Do I set a good
example by being truthful about money matters? |
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6. Do I give my children
more financial responsibilities as they get older? |
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7. Am I a good money
manager, giving my children a good example to follow? |
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8. Do I allow my
children to make their own decisions about money when there are
alternatives? |
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9. Do I praise my
children if they have made wise decisions with their money? |
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10. Do I help my
children find ways to earn extra money that is age appropriate and
suits their abilities and skills? |
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11. Do I allow my
children to make mistakes related to money and help them to
understand consequences? |
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12. Do I sometimes
verbalize my own desire to acquire more goods and services than my
income can handle so that my children know that I say "no" to
myself, too? |
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Developmental
Characteristics: Preschoolers |
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Understand the idea of saving when they can see and touch the
amount.
See
money as a way to get things they want.
See
all money as having the same value.
May
think coins have more value than paper money.
Understand the concept of borrowing by borrowing something and
returning it
(i.e.
video from a video store).
Know
everyone must do unpaid routine family tasks.
Need
opportunities to make limited choices.
Understand what is theirs and what belongs to others.
Imitate much of what they see adults do.
Choose
between two or three items to be purchased.
Can't
differentiate between reality and fantasy.
Can't
see things from the viewpoint of another person.
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Developmental
Characteristics: Elementary |
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May want to spend on trendy items for peer approval.
Show more interest in having money.
Capable of long-term planning for spending or
saving.
Understand to some extent how much money will buy.
Often try to figure out ways of earning money.
Understand the difference between needs and wants.
Understand that money is limited.
Need guidance to understand the value of things (
i.e. the amount one pays for shoes).
Concerned about fairness in how siblings are
treated.
Can use math skills to keep track of expenses.
Need to feel an important part of the family and
know that their opinion counts when making family decisions.
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Developmental
Characteristics: Teenagers |
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Want to make earning and spending decisions without
consulting parents.
May be dissatisfied with household income and what
it provides.
May borrow from friends to satisfy money needs.
May request to use parents' credit cards if their
peers are doing so.
Can begin to earn and save for long-term goals.
Understand that planning allows the family to set
financial goals and work together to reach them.
Begin to deal with abstract concepts.
Begin to set goals and plans to reach goals.
Understand the trade-offs and consequences of
their money management decisions.
Still need help in establishing limits.
Often test values with others.
Can see things from the viewpoint of another
person. |
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There are many activities you can do to teach your
children about money. Here are some suggestive teaching activities
for your preschoolers, elementary kids, and teenagers. |
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Preschoolers |
Elementary |
Teenagers |
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Play grocery store or bank with pretend money.
Borrow or rent something they need to return.
Have children do unpaid chores, like setting the
table or putting away toys.
Read stories about money |
Teach children to check prices in newspapers and
catalogs before buying.
Help establish the amount of their earnings to be
saved and why it's being saved.
Play Monopoly or Pay Day games.
Plan how to share the cost of an item they cannot
afford from their earnings. |
Open a checking account and help them balance it.
Help them understand the use of cash and credit.
Help children return an item or write a letter of
complaint about an unsatisfactory item.
Allow participation in family financial
discussions about what to buy, how to save more, and how to cut
expenses. |
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References |
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Crary,
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Danes,
S.M.1991. "Money, kids, and allowances." Young Families Newsletter.
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Danes,
S.M. 1992. Parental perceptions of children's financial
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SC.
Danes,
S.M. 1992. Allowances and Alternatives. FO-6117, Minnesota Extension
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Felder, L. 1990. "Moneywise kids: Teach kids early to save, earn,
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Morrow, A. "Money Management" Lesson I in Money Sense for Your
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