One of the first and most important things that you should teach your child about handling money is how to accurately judge the importance of different things to buy whenever they go shopping. An easy way to do this is to let your child come along with you on any other shopping trips and involve them in the decision process. Let them know why valuable supplies for the house (like paper towels) need to be prioritized over things that are just for enjoyment, like toys. Doing this will give them practice in rejecting impulse buys to save more for the important things. To make it more fun for them, make it a game in which they get a “point” whenever they make the right choice in an important thing to buy.
Having an appropriate amount of patience for large purchases is something that even adults struggle with, but there is a creative way for you to teach your child how to develop this patience early on. Have your child sit down in front of something that they like to eat. Tell them that you are going to leave the room for our one minute, and if they don’t eat what is in front of them until you return, then they can have two instead of just one. Whether they pass the test or fail it, this will be another strong way to illustrate how important it is to have self-discipline and ignore instant gratification.
Making a budget
“To explain the process of making a budget to your child a little bit easier, try to explain dollar amounts in terms of days,” said 1st Financial Federal Credit Union. For example, a $10 bill is equal to one dollar a day for 10 days. If you have a calendar handy, you can explain it even more clearly by drawing a small $1 on Monday through Friday, and explaining that it is equal to the$5 on Saturday. Doing this will get them into the mindset where they learn to break down the full price of their necessities into a certain amount of money for each day leading up to the payment.
Turning saving into a habit
One of the simplest ways to have your child turn saving into a natural habit is to give them a clear jar for holding pennies. Tell the child to put every second penny that they find into the jar, and tell them that they will win the game once the jar has been filled up to a certain line. Even without understanding the details, they will be associating the act of putting away currency with the positive feeling of winning; this can be a very powerful form of operant conditioning in their formative years.
The meaning of bills
Because many children don’t receive a very comprehensive education about finances and bills in school, making sure that your child knows the relationship between saving and keeping the house running is important. One of the easiest ways to quickly teach your child about the importance of bills is by turning out the lights. Tell them that without saving enough to pay bills, the lights won’t come back on.
The relationship between money and time
When you are explaining to your child what employment means, it can be easier if you have access to a wall clock. Explain to your child that when you are at your job, every time that the little hand goes all the way around the clock space, a certain amount of money has been earned for hard work. This will let them understand that spending recklessly doesn’t just steal money, but also hard-earned time.
The results of saving
It is one thing to simply tell your child that saving money can be very beneficial for them in the long run, but to go a step further, you can make it even more clear to them with a physical demonstration. Show your child to piles of candy. One power should be big, and the other piles should be small. Start taking away two in three pieces at a time from the big pile, while adding one piece at a time to the small pile. Explain to your child at the big pilot is an example of spending too much money, while the small pile is an example of saving money. Eventually, the child will see that the saving pile of candy is much bigger than the spending pile. This show them that not letting go of their money is more important than spending it on everything.
Balancing work and play
One of the biggest challenges to saving properly can be the temptation to just enjoy oneself without thinking about it until it becomes a problem later on. You can use the candy pile exercise once again to show how saving consistently actually result in having more freedom to enjoy themselves than if they didn’t save; this can be represented by taking a small amount of candy out of the saving pile after enough has been built up and letting them eat it.
Being happy in ways apart from money
In addition to teaching your child how to save properly, you will also want to ensure that they know the importance of not becoming so fixated on money that it consumes their every thought. On a sheet of paper, draw a few pictures of the simple things that can be bought from the store, but also draw a smiley face to represent happiness. Ask child how much they think each of these things cost in the store. When they come to the smiley face, they may seem confused. Explain to them that a smile is priceless and can’t be bought, no matter how much a person saves up.