When you have young children, teaching them about money is a big part of our job as parents. And this is especially important when they are young because they learn so much more quickly when they are younger. And, they are more apt to listen to us and follow our actions because they look up to us greatly at this age. Not as much once they hit the teenage years! To the earlier you can start, the better.
But it’s not always easy, or fun. Especially when they are really young because the concepts can be much too difficult for them to grasp. However, I have found some great ways to make teaching young children about finances fun. And not just for them!
One of the easiest financial lessons I found to begin with was grocery shopping. When my children were around the age of 2, they began helping me make a grocery list. I found the best way to approach this was to have them go through the pantry and refrigerator while I wrote down a list. They would ell me what they thought we needed and we would discuss it. Because sometimes what they thought we needed was ice cream and cookies!
Whenever we went to the store I would have them help me decide which items to buy. I started out simply by comparing the same item but different brands. That way it was easier for them to see the cost difference between the two products.
Example: If Brand A can of beans costs $.89 and Brand B can of beans costs $.99, which one is the better deal.
This math is usually simple enough for them to grasp when they are much younger. As they got a bit older, I would increase the complexity of the math needed. In that, I would then compare similar products that had different quantities also. This can be pretty confusing for them initially. But once they understand it, it’s a really fun game for them to find the best deal.
Every member of the family should be pitching in to help. So, chores and allowance are another great way to approach teaching young children about finances. However, with the allowance comes some strings. Besides not getting paid if they don’t do their age appropriate chores, they also have to create a budget for it.
One of the most common ways to create an allowance budget is to split it up into the following 3 categories:
Of course, you can discuss this with your children because they may have other categories in mind. But these 3 categories are usually the most simplistic to begin with.
Once you have the allowance budget categories defined, then it’s a good time to open the discussion with your child regarding how much should go in each category. Percentages are easier for us as adults, but may not be as easy for your young child to grasp.
Therefore, if may be best to start with a specific dollar amount in each category.
Here is a good example of both options for a simple $10 allowance since this number can be easier for them to understand from a percentage perspective.
- $10 = $2 for Donations, $4 for Saving, $4 for Spending
- $10 = 20% for Donations, 40% for Saving, 40% for Spending
Ultimately, how this is broken down is completely up to you and your child. The main point is that they begin to learn the basics of budgeting their income. So that it will be much easier for them as adults when they have to do it for themselves.
sell their old stuff
As most of us know, with children comes a lot of extra stuff. And as they grow, they outgrow that “stuff” fairly rapidly. Most of the time, the majority of it is also barely used. So, this is another great area to weave financial lessons in for your young child.
When it’s time to declutter the house, have your child go through their stuff to sell also.
The first thing to go through with them is which items they might be able to sell. And then you should have them help you figure out how much they think they can sell the items for.
A lot of times I prefer to sell my kids outgrown stuff online. But, having a yard sale is another great way to approach this lesson since your child will have to be physically present for it.
This lesson helps to teach them the value of their stuff and the value of a dollar. So, it’s really a two-fold lesson that is extremely important for them to grasp now.
Plus, it’s a great place to add on a third lesson while you are at it. Let them keep the money they make on their stuff and put it into a high yield savings account. That way they can watch it grow each month and you can help them learn about compound interest. Now, I call this a big win!
And last but not least, the birthday budget. I think my kids always think that money grows on trees. Which is extra funny because we actually have a money tree, but it doesn’t grow money!
With that being said, their birthday wish lists always start out much further outside the budget than they think. So, it’s a good time to bring them back down to earth and have them help with a more realistic birthday list.
First, let them know what the budget is for their birthday. The best way I have found to do this is to tell them that they need to find some gifts that are under $20 and they can find one or two that are closer to $40 – $50 also.
This way, the majority of the birthday gifts they want fall into most people’s budget. And the couple of larger gifts could be from us or a joint gift. But, I also let them know that they will never get everything on their list. That way I help to set up their expectations and keep a bit of the birthday surprise going.
Teaching young children about finances
Overall, there are a lot of great ways you can begin teaching young children about finances and it still be fun. My favorite ways include:
- Having them help make the grocery list and compare food prices
- Make an allowance budget
- Selling their old stuff and putting the money into a high-yield savings account
- Creating a reasonable birthday budget
If you can start with these easy lessons, then you are well on your way to increasing your child’s financial knowledge. And the earlier you can start, the better. So, have fun with it and get started today!
What are some of the best ways you have found to teach your young children about finances and still make it fun?