5 Tricks to Teach Your Kids about Money

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How many of you out there really understood the value of money when you were kids? I know I didn’t. I’d tell my parents I wanted something and either they’d buy it or they wouldn’t, but I had no real sense of what it meant when they said they couldn’t afford it. If you’re a new parent or parent-to-be, you’re probably rediscovering this phenomenon or just starting to think about how it relates to your kids. How can you get them to learn that there is a finite amount of money you have budgeted without using words like “finite” or “budget”?

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Stop buying things for them – give your kids money. If this sounds crazy to you and you think your kids will just waste the money, you’re probably right. But giving them money will make them feel empowered. Plus, for the first time they will actually have the bills taken out of their hands and feel that loss – even if they don’t understand it at first.

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Pay them for their labor. Where does money come from? Doing a job. Some parents go back and forth over whether they should pay their children for chores or just make them an expectation, but paying your child for doing work in general is a great way for them to place value to money – as in, “I had to spend an hour raking the lawn for that $5!” If you’re still concerned about paying for chores, consider creating a minimum list of chores but paying for things they do above and beyond that list.

Don’t give them any more money. Once their “allowance,” or whatever you decide to call it, has been used, don’t give in and hand over more cash until the next scheduled time. They may not like it, but eventually it will make them start to think about being more careful with how they spend their money.

Offer to match money. If your child keeps harassing you about an expensive purchase, tell them that you can’t buy it for them, but you’ll help – by matching whatever amount they save. In fact, this is a good practice to encourage even when they aren’t trying to buy something specific. They’ll learn that saving money brings them more money – a lesson most of us could afford to learn!

Bargain hunts and trade-ins. Sometimes the concept of money just doesn’t make sense to kids (because, really, what is the value of money except the value that we put on it?), but even very young kids can understand the concept of getting 5 toys instead of 1. To this end, one great way to teach your kids about money is to go to a store like Toys R Us, then take them to a used or bargain store. At Toys R Us, their money will buy them one thing, but at the cheaper store, they can get several toys – more value! What do you think their choice will be? An offshoot of this is to let your kids resell or trade-in old toys and books to get new ones. Even though it’s not exactly money, they’ll start to learn the idea that three of these is worth one of these – and so on!

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And of course, the most important way to teach your kids about money is by example – if you manage your money well, chances are they will learn good habits just by watching.