Teaching children the value of a dollar is a lesson that can be taught every day, and there is no better time to get started than when you are reviewing your own holiday budget and savings plan. This time of year there are plenty of chances to help kids learn about the basics of money… most importantly, that to obtain the things they want or already have it takes good money management skills.
The thought of discussing the concept of money with children may seem too complicated for them to understand, but the key to success requires a little bit of creativity to find ways to incorporate a money lesson into an everyday conversation. And to also use tactics based on their age and comprehension level. Here are some suggestions to get you started.
Saving, Spending and Giving
The three main functions of money that your child will need to learn about are saving, spending and giving. Whenever your child has money to spend, discuss how they can split it into a certain percentage to save, a percentage to spend, and a percentage to give. Explain that the savings portion should be put aside to grow over time, that they can use the money designated to spend on whatever they wish and that it is important to designate a portion to give back to the community or those in need.
Preschool – Grade 2
At this stage, you will be introducing your child to money and the concept that it has value. This may include talking about how it can add up over time, resulting in a large sum. Help your child identify the different denominations of money starting with coins and then moving up to bills. It is also the ideal time to teach the importance of starting to save money. Give them a piggy bank to store their money in and help them keep a tally of how much they save.
You can teach your child about money through play. When you help them understand the concept of money and how it can grow through games, they are more likely to stay engaged with the process. Young kids love to play The Penny Game—it’s fun and rewarding! The goal is to save the same number of pennies for each day the game is played. So for day one, one penny will be put away, day two, two pennies, and so forth until you have reached a full month or more of saving pennies.
Grade 3 -Grade 8
Once kids have grasped the concept of money, it is time to focus on the value of money as well as how the savings process works. This is a good time to put the handling of money into action. Create a list of chores and responsibilities for your child that can earn them a weekly allowance. You may also want to come up with additional jobs so they have the opportunity to make extra money if they want to. This will teach them that not only does working help them make money now, but also putting in extra “hours” can result in earning even more money.
Now that they have some of their own cash, discuss the importance of saving and spending money. Start with having honest conversations about what things cost. This can include talking about items that your child wants, both large and small, as well as the things that they need that you provide for them. When they want to make a purchase, help them put it into perspective by asking them how many chores they would need to do to make enough money to buy the thing they want. This can help them determine if the cost is worth the amount of time they have to spend doing chores to obtain it.
Tip: Try out this savings calculator!
Finally, explain the savings process and encourage them to put aside a certain amount of their earnings each week. A good place to start is to open a Young Savers Account with Lakeland Bank. Use the savings account to show your children how their money can grow over time especially if they begin saving early. Talk about short and long-term savings goals and explain how goals can develop good habits to save for the things they want in a few weeks as well as for things that they will need in the future.
High School and Young Adults
Once your child can apply for a job, it is time to tackle the tougher, more complicated aspects of money. If they don’t already have one, help them establish a savings account or transition their youth account to a Statement Account. Using online and mobile banking can be great digital tools to help them manage their money. It can also be a good time to discuss how debit cards work, how to use a credit card wisely and the importance of a good credit score.
The takeaway lesson at this stage is teaching them to budget their money each month to make sure their account will cover their expenses. Using a budget is the best thing someone can do to establish good financial habits. A budget will help them track what they spend, but it will also help identify where they can save money! Share this Budget Calculator to help them see where all their money goes.
Explain the Difference Between Wants and Needs
No matter how old your child is, teaching the difference between wants and needs is an important lesson when it comes to managing money. Be sure to keep it realistic and age appropriate so it is easier for them to understand how to prioritize how they spend money. For example, when the teen in your household wants to buy a pair of new designer shoes for $250 and they only have $275 in savings, ask them how they will purchase the gas they need to fuel their drive to school for the next couple of months.
This year, start a new holiday tradition and add financial education to your child’s wish list because it’s never too early to teach kids about the value of a dollar! Children who learn about the importance of good money management will have the financial literacy skills needed for a more secure future.
If you are looking for ways to help your children save money or want them to open the best savings account for their needs, the experienced professionals at Lakeland Bank can help. Contact us today or find a branch near you so we can discuss the financial products to help put your children on the path to a bright financial future.
If you found this information helpful, you may enjoy How to Answer the Top 5 Questions Kids Ask About Money or to help your soon to be college student read our blog 4 Tips to Manage the Financial Responsibility of a College Education.