How to Teach Money Management to Children

Children may not have much money of their own, but financial education needs to start long before they do. Most schools don't teach money management, so it's up to you to tell your child what she needs to know. You can still be an effective teacher, whether you've always been a financial wizard or you've made some mistakes. You don't have to be a perfect financial manager, but you do need to start talking about money management. The lessons you teach now can prepare your kids to handle money responsibly.

Instructions

    • 1

      Talk about where you get your own money and how you spend it. Explain that you earn money from your job, which pays for your car, your home and household expenses such as food. Describe what happens when you withdraw money from an ATM. Explain that signing a credit card receipt equals a promise to pay back that money later. Pay your household bills in your child's presence so that he can see that it's a regular task you must do.

    • 2

      Give your kids an allowance so that they can get hands-on experience with managing money. Financial expert Vicki Hoefle told PBS that children should get an allowance as soon as you can trust them not to put it into their mouths, which is usually around age 2. Start with a small allowance and gradually increase it as they grow.

    • 3

      Help your child set goals with money. One of the most important things you can teach your children about money is that it's a useful tool to help you get things that you want. Model this concept by saving for a small, quickly attainable goal, such as a day trip that you'll take together or redecorating her bedroom. Encourage her to save her allowance for the goals she wants to reach too, like saving for a video game or a new outfit. Encourage your children as they get older to look for ways to earn additional money, such as babysitting or mowing lawns, so they can reach financial goals more quickly.

    • 4

      Allow your child to make mistakes with money. For example, give him the opportunity to blow all his allowance on candy when he's saving for a new toy. If he does, don't buy the toy for him. Although he will likely be frustrated when he has to wait longer to get that coveted toy, it will teach him the importance of saving money more effectively than any words you could say. Let him decide how to spend his money rather than micromanaging his choices.

    • 5

      Set a good example. Your child learns from what you do, so you should save money if you want her to do the same. Talk about how you decide to spend your own money. If you're considering a purchase and change your mind, talk about the decision in front of your child. For example, if you decide not to buy a sweater, tell him, "I'm not going to buy this now because I'm saving money for a new couch."

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