You can start early with your young children teaching them good money habits like smart shopping and price comparisons. As they get older, teach them about money management, budgeting and different types of savings accounts. Show them why they would want to save up some of their money rather than spending it all quickly.
Finally, teach your children about investing rather than just saving and the value of compounding and long term investments. This is a two part series, be sure to sign up for the Newsletter for future money lessons for your teenagers and young adults.
Counting Money & Calculating Correct Change
For younger children, they need to learn the value of money both literally and figuratively. Young children learn a little about money in school but it is mostly counting up coins and how to calculate the correct change. As a teacher, I see that my students that have spent some of their own money or merely pay for things themselves grasp these skills easily in class. Other students have a poor understanding of dollars and cents because they have no experience using money in the real world.
It is a great idea to give your child the responsibility to pay for something themselves and to get the correct change. This can be as simple as standing at the register with them while they pay for an item or sending them into the store alone to make a purchase. When we need an after dinner convenience store run, I often send one of my children in to the store to get the milk, eggs or sometimes chocolate cake. This way, they have the responsibility to pay attention to what an item costs and how much change they should be expecting to get back. At times, I make them estimate the cost of each item and add up the total to see how much money they should bring in to the store with them.
Now that my four children are a bit older and are able to go out on their own it is important that they pay attention to their spending. They need to budget their money so that it lasts them the day and they have enough money left to buy something to eat. My son and his friends will sometimes buy a whole pizza together rather than all paying separately. They are also savvy enough to buy a liter of soda on sale at the pharmacy nearby and then ask the pizza place for cups so that they can share. This way, they are able to get their “meal” for less than $5 each. If they all paid for two slices and a soda separately each would likely being paying $7.50 or more. I love that the boys are paying attention to prices and sales.
Estimating & Budgeting
Sometimes at the grocery store, I will have one of my children keep track of how much money we are spending. This makes them pay attention to the prices of each item and keep a running total in their head. This helps my kids to develop some understanding of how much food and household items cost. As they get older though, they are on to me and know that I’m really trying to sneak in some mental math and estimating. I used to tell my kids we only had a certain amount of money to spend and their job was to keep us under that limit. That math game was fun and educational while it lasted.
I like making my kids do the math in the grocery store for some comparison shopping. I think it is important for children to learn to figure out prices and which item is a better deal. Does it pay to buy a five pack of sauce or is the buy two get one half off the better deal? Children need to learn to calculate the per item price in order to be a shrewd shopper. My children seem to think that ice cream is an important food group, that trait was obviously handed down from my husband! I have taught my kids at the very least, to pay attention to the prices and look for the sales! This way they can find a 2/$5 deal rather than $8.49 for one container which would be finished in one night. Back in the old days before children I rarely paid attention to the cost of food when I was only shopping for one or two people. Now, feeding a family of six and often their friends as well I am sure to pay close attention to the prices of items.
I teach my children to look for good coupon deals to help save themselves some money. My oldest son is an expert at ordering Dominoes pizza from his phone app. He makes the most of their coupon deals each time. I also encourage my kids (and husband) to use my membership programs at the various stores and restaurants they may go to. Most of the card accounts are connected to our home phone number so these are easy to use to earn rewards points. My other son comes home and reports to me how many points he earned for me by remembering to use the rewards card.
When my children are leaving the house and have their hands out asking for money, I often make them use some of their own saved money. I ask them to total up how much money they think they will need for wherever they are going and then I offer to give them a portion of the money. By doing this, I’m teaching my kids to do a little budgeting of their own. They can’t just ask for money endlessly and fool themselves into thinking that money really does grow on trees or that the cash machine gives it out for free! Now, I see my children weighing their options, calculating costs and deciding how important their trip to the mall really is to them.
Hidden Budget Expenses – find them in your spending
Pay Debt Faster – make your debt more manageable & pay it down
Save $1200 per Year – simple ways to save money
Teens and Money – budget and investing lessons for teenagers
Needs vs. Wants
When my son went on a trip to Florida with another family, I made him bring his own spending money to pay for his entertainment. This gave him some of the financial responsibility but we paid most of the cost of his trip. The following year, the same trip came up and he was invited again to go with another family. This time though, they were flying rather than driving. This was not an expense I had been planning! I made it clear to my son that I did not consider it “necessary” that he go on this trip. Since the trip was important to my son, I gave him a choice: stay at home for free or pay for the plane ticket and expenses himself. Not surprisingly, he chose to pay with his own money, and didn’t even spend it all.
I know my oldest son is learning the importance of budgeting and having money saved to put towards something special you want. He has been saving for a car for years, and he just bought one himself!
When my children need necessities like new clothing or shoes because they grow so fast, I pay for those items. If my children think they “need” another sweatshirt or another new phone case, they need to use their own money. Children should learn to prioritize their “needs” and if they must use their own money, it helps them to understand. The same goes for groceries, I buy all the food for the house including desserts and school snacks. If my children are convinced that they need more cookies, ice cream or candy, they need to pay. It is interesting to see them weigh the options and decide if they really need that food since they will be paying for it. More than once I have seen them change their mind and decide it’s not so important to them. When I am paying for it they “need” it, when they need to use their own money, they see that maybe more ice cream is not so important to have after all.
Discounts & Percentages
It is also a good idea to teach you children to calculate basic savings percentages. Often an item looks like it’s on sale at a bargain but the money saved turns out to be minimal. Children should learn not just how to do math in school. They need to apply math practically to their everyday life situations, which makes them really understand.
Kids should be able to calculate simple savings like 10%, 20% or 25% off an item, hopefully in their heads, but with smart phones, a calculator is never far away if needed.
Your children should be able to check a restaurant bill for accuracy and add on the proper tip. They can also learn how to divide the bill easily when going out with other friends.
Online shopping is another consumer lesson kids can learn to use wisely. They can find the best deals, free shipping, fastest delivery all by becoming savvy online shoppers. My second son is quite the online expert and has helped me more that once by googling several items online to compare the prices. We decide if it is better to buy the item now from our local store or buy it cheaper online and wait for it. We compare cost, shipping, delivery options and make an educated decision on our purchase. Some stores will honor the lower price that you find online so I have used this a few times to save so money using this tactic.
Since my children will begin driving soon, I also make a point to make them notice local gasoline prices and policies. In the township where we live, there is an ordinance banning self-serve gas. This means that all gas stations near us pump your gas for you which is nice, but we pay more for our gas! When I am closer to work, the gas stations charge 9-13 cents less per gallon and some of these stations pump your gas for you as well. If you combine this savings with the cash discount, it certainly adds up each week. My husband was shocked at being charged an extra .15 cents per gallon because he used his credit card to pay rather than paying with cash.
These are all practical money lessons that are important for anyone to master not just kids. By exposing your children to money lessons early, you will help them be smarter consumers in the future. One of our next money lessons will be about purchasing a car to drive when you get your new license. My son has car money that he has been saving for years but I’m quite sure he doesn’t realize how much the added costs of gasoline, registration, insurance and maintenance will add on to the cost of the car. More on Teens & Money Management in a future post!
Other Articles from the Web
Parents.com has a good article with age by age money lessons to teach your children.
Rosemarie from the Busy Budgeter has a wonderful post with unique money and budgeting tips her parents taught her as a child.