Growing up, my family didn't have a lot of money. We didn't have all the best toys and the most fashionable clothes. During elementary school, I was used to wearing my sisters hand-me-downs. For me, that was how it was and I didn't know any different. My parents did all they could to provide for us and we were happy.
For young children, it can be very difficult to understand the cost of goods. They don't understand the difference between the cost of their favorite treat and their favorite toy. Children need to learn the value of money at a young age. Author of Kids and Money: Giving them Savvy to Succeed Financially, Jayne A. Pearl said, "It's actually easy to teach kids about money. Turn your day-to-day activities into learning experiences." Teach your children how to identify coins and dollars. With play money, they can have fun and use their imagination in playing store and restaurant by exchanging goods for money.
Paul S. Richard (Institute of Consumer Financial Education's Executive Director) shares 18 Ways for Children or Grandchildren to Learn the Value of Money:
- As soon as children can count, introduce them to money. Take an active role because repetition and observing others are the two methods they learn by
- Help children learn the difference between needs, wants and wishes. This will prepare them for making good spending decisions in the future.
- Allow young people to make spending decisions, both good and poor, and then encourage a discussion of pros and cons before more spending takes place.
- When giving children an allowance for income, give the money in denominations that encourages saving. For example if the amount is $5, give out five $1 bills and encourage at least one be set aside in savings.
Children also need to learn how to save their own money to purchase the things they want. For a fun activity book for young children to learn from, go here.