Teaching the Little Ones about Money

Taking the time to teach your young children about money can go a long way toward preparing them for the future. Children learn and mimic their parents' behavior. So, if you talk to your kids about money when they're young (and still willing to listen intently to you) and make a conscious effort to set a good fiscal example for them as they grow, they'll be that much more aware and apt to be financially responsible as adults.

But how do you go about it? What should you say? Well, here are some suggestions of what you can tell your five-year-old about money and money matters:

• Although it may be a bit stale and the ultimate cliché, it's by no means against the law to fall back on the old standard that "money doesn't grow on trees." Just explain to them how Mommy and Daddy get the money that they have.
• Sit down with your kids, show them coins and dollars of various denominations and explain their differences and what they mean.
• Explain the importance of saving money.
• Explain how money is used differently to purchase different things.
• Talk to your children about banks and explain to them (basically) what they're for.
• Tell them how a budget works and why it's important to adhere to one.
• Try to explain to them why it's important to save up for things that you really want.
• On your next trip to the supermarket, show your kids the different prices of items.
• Let your children know that even though you've just spent money for groceries, you have to save money for the following week so that you can buy more groceries.
• Explain to your child about the importance of giving to charities or other worthy causes, such as your church, a local 'helping hand' organization or a national disease-research foundation.

This, of course, is a very abbreviated list of the possible things that you can discuss with your children; and, once you do, you can be sure they'll ask a number of questions. They won't be able to absorb and process all of the information you give them at once, so you may wish to pick one topic a week for discussion. Remember, don't neglect the substantial impression that 'visualization' can make in teaching them, such as showing them different coins, taking them to the supermarket and pointing out different prices, having them watch as you balance your checkbook, or figuring the household budget for the month. It may seem foreign to them at first, but the more you expose them to financial concepts and utilize money in front of them, the more they'll come to understand the meanings.

Here's an idea that's sure to help them learn easily: buy piggy banks for your kids and give them loose change at the end of the day. Ask them to identify the coins as they deposit them into their 'accounts.' This is a fun way for children to learn about money and it will also show them – in a very basic way – just how 'saving' works.