NDSU Extension Service - Ramsey County


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Teaching Children about Money

Teaching Children about Money


            Money gives people -- both young and old -- decision-making opportunities. Educating, motivating, and empowering children to become regular savers will enable them to keep more of the money they earn and do more with the money they spend.  Here are a Baker’s Dozen ways to help educate children about personal finance and managing money:

  • As soon as children can count, introduce them to money. Take an active role in providing them with information. Observation and repetition are two important ways children learn.
  • Communicate your values about money with children as they grow. Every family has its own set of values concerning money - how to save it, how to make it grow, and most importantly, how to spend it wisely.
  • Help children learn the differences between needs, wants, and wishes.  Our wish lists are always longer and deeper than our pockets. Explaining to children how to make this difference work for them, as opposed to against them, is an important life lesson. This will prepare them for making good spending decisions in the future.
  • Introduce children to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they also will realize that the quickest way to a good credit rating is a history of regular, successful savings. Some parents even offer to match what children save on their own.

  • When giving children an allowance, give them the money in denominations that encourage saving. If the amount is $5, give them 5-1-dollar bills and encourage that at least one dollar be set aside in savings.
  • Take children to a credit union or bank to open their own savings accounts. Beginning the regular savings habit early is one of the keys to savings success.
  • Use regular shopping trips as opportunities to teach children the value of money. Going to the grocery store is often a child's first spending experience. Typically, about a third of our take-home pay is spent on grocery and household items. Spending smarter at the grocery store (using coupons, shopping sales, and comparing unit prices) can save more than $1,800 a year for a family of four. To help young people understand this lesson, demonstrate how to plan economical meals, avoid waste, and use leftovers efficiently.
  • Allow young people to make spending decisions. Whether good or poor, they will learn from their spending choices. You can then initiate an open discussion of spending pros and cons before more spending takes place. Encourage them to use common sense when buying. This means doing research before making a purchases and waiting for the right time to buy.

  • Be cautious about making credit cards available to young people, even when they are entering college. Credit cards have a message: "spend!" Some students report using the cards for cash advances and also to meet every day needs, instead of for emergencies (as originally planned).  Many of those same students find themselves having to cut back on classes to fit in part-time jobs just to pay for their credit card purchases.

  • Take advantage of the Web. The Internet is full of age-specific money games for kids. Just last year, PNC Bank and Sesame Street teamed up to create fun videos and games that teach kids about money. Many children will find it easy and exciting to learn about money from Elmo and his friends.

Remember old-fashioned board games. The Game of Life, for example, teaches kids about the various expenses they'll encounter from college to retirement. Another favorite is the Allowance Game, in which kids go around the board doing chores and collecting an allowance, then spend their earnings on the things they want

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