Teaching Children About Money

I think it is very important that parents take on the role of teaching their children all about money. I have provided some valuable resources which will help parents to teach their children about money.

Children may not necessarily adopt their parents' attitudes toward money. In fact, a child may have the opposite reaction. The important fact here is that the attitudes of the parents do have a powerful influence on a child's attitude toward money whether it is the same as the parents' or opposite from theirs.

Money matters are closely involved with other family relationships, so you must be extremely careful that they do not create added problems in family life. Good financial relationships with children help develop better emotional relationships within the family.

Children Learn Through Observation

Children learn by everything about money by observing their parents. Teaching your children about money will primarily come from you. The ability to manage money is not an inborn trait. Children learn from experience and example, and this learning involves a long process. Many parents are unaware that the spending, saving, and giving attitudes developed in the early years by their children are essentially those that they will carry with them into adolescence and adulthood. For this reason, certain basic principles about the wise use of money must be taught to children.

Giving children a sense of values about money matters is one of the primary responsibilities of every parent. On shopping trips, young children observe their parents handing the clerk at the counter shiny objects and green pieces of paper. In exchange, the parents take home sacks of food, clothing, or other necessities of life. Through observation, children become aware of the important role that money plays in the lives of others. They hear the value of money being discussed all around them. They learn a great deal about the value we place on money by what we say about it and how we use it.

The spending, saving, and giving attitudes developed by children are basically those that they will carry with them all of their lives. It is therefore vitally important that parents instill in them the proper attitudes toward money and provide guidelines for using it throughout their development years.

It is vital that parents take on this roll instead of their friends or school. Balancing a checkbook and learning all about budget planning and credit cards should come from parents. The problem today is, that most parents do not teach their children anything about money and how money works. They are leaving this chore up to their kids when they grow up.

That is why most people do not know how to handle money. They live from paycheck to paycheck and are heavily in debt when they get out of college. They need to know the rule of 72 and how it can work for or against them. Should be taught about investing and planning for their retirement years while they are working. 

Consider The Importance Of An Allowance

Money is a tool; and as is true of all tools, learning to use it wisely requires practice. Children can and should be taught how to manage money. an allowance is one of the best tools for teaching a child how to handle money wisely. A reasonable, weekly allowance provides an opportunity for teaching evaluation, good judgment, budgeting, and self-reliance. Children should be given an allowance just as soon as they understand the use of money for getting the things they want. Begin with small amounts so you can avoid costly mistakes that neither you as parents nor the child can afford. Over a number of years, children should learn how to live within their income, how to exercise selectivity in buying, how to save for things they want or need in the future, and how to give even when it means giving up something else they would like to have or do without.

Allowance Tips

When planning the amount of the allowance, several factors need to be considered:
  • The amount the child receives should depend upon family circumstances. The allowance should be a fair share in terms of your family's consumption in general.
  • Consider the child's needs. The older children are and the wiser they have become in managing an allowance, the more money they should be able to handle and the greater voice they should have in helping determine the amount.
  • Take into account what the child's friends and schoolmates receive. The allowance should not be a great deal less then, nor more than, that of other friends. Either extreme is bad.
Children should be given full responsibility for spending their allowance. Some agreement may be reached on certain "must" items, such as money for school lunches, supplies and clothes; but with the rest, they can spend it, save, give it away, waste it, or even lose it. It is important to let children make mistakes with their own money. This is how they learn.

When a child starts school, a weekly allowance to pay for school lunches, extra milk, supplies, and fifty cents of the child's very own may be sufficient. But as children grow, their interests broaden, and they need more money for social activities. The allowance, plus what might be earned from a part-time job should be reconsidered from time to time and adjusted to fit individual needs. When boys and girls enter their early teens, they need the experience of making more serious decisions for themselves. Again, what the allowance should cover, such as clothes, dates, school expenses, grooming aids, and recreation should be agreed upon. They are rapidly approaching greater responsibility and greater independence as they near adulthood.

Establish A Budget

As children and youth learn to establish a budget, it is important to help them understand why a budget is necessary. Stewardship involves responsibility for the total use of all resources or possessions. Management of money is not an option. The choice is not: "to manage or not to manage"; the choice is between the effective and ineffective management of money.

Here are some guidelines on what children of various age brackets might be expected to budget for out of their allowance:
Under 6 - Gifts, candy, ice cream, gum, soft drinks, small toys, books, crayons, blocks,
                and dolls.
Ages 6-9 - Gifts, special savings for things they want, toys, books, movies,
                  amusements, magazines, hobbies, club dues, school lunches and supplies,
                  birthdays and Christmas gifts.
Ages 10-12 - Gifts, savings for things they want or need, fees for movies, swimming
                      pool, bowling, club dues, hobby materials; books; iPads, games, special
                      events; school lunches and supplies, gifts for birthdays and Christmas,
                      and some small items of clothing.
Ages 13-17 - All of the items listed for other age divisions plus money for dates,
                      cosmetics and grooming supplies, jewelry, clothing, school activities, and
                      savings for special purposes such as future education, a car, or travel.

Budget Planning Process

Youth should estimate all expenses before starting the budget planning process. The areas of the budget should include the following.

First, Determine expenses.
  • Gifts and giving.
  • Savings. Used for future wants or needs.
  • Clothes. Estimate how much has been spend on clothes in the past 6 months and divide by six to get a monthly estimate.
  • School expenses. Includes bus fares, fees, books, gym and lab equipment and supplies.
  • School lunches.
  • Hobbies. Could include music lessons, books, CD's, sports equipment, and so on.
  • Entertainment. Includes date money, movie tickets, ball games, and special activities.
  • Toiletries and cosmetics. Includes makeup, hair spray, shaving lotion or cream, perfume or after shave, and so on.
  • Miscellaneous. Items include birthday and Christmas gifts, gas for the car, and driver's license fees.
  • Personal money. This would be money that does not have to be accounted for. This amount should not be too high.
Second - Determine what part of the expenses youth should take care of. This is a family decision. Parents and children should decide together what part of expenses the family will pay for and what part will be covered by the allowance or part-time job.

Third - Determine income. Youth need to determine their income. This includes allowance, income from a part-time job, and money received as gifts.

Fourth - Match spending to income. Youth need to fit their spending into their income. This may require adjusting during the year. A budget should be prepared.

Fifth - Keep a record of financial activities. Youth should be encouraged to maintain some record of their spending, giving, and saving habits. A weekly accounting of the ten basic areas should be sufficient. The primary objective here is to learn how to develop and follow a money-management plan--not to learn detailed bookkeeping.

Moving from Dependence to Independence

Young adults usually can expect to spend at least a few years after they have received their education in self-supporting employment before they get married and start families of their own. During this period, they need to continue to use good money management techniques. Young adults who have not had opportunities to get any experience with money management prior to marriage suddenly take on heavy financial responsibilities that they are not trained to assume. They are confronted with the necessity of providing for living expenses, leases or mortgages, purchase contracts, various kinds of insurance, taxes, transportation expenses, and many other complicated purchases.

Financial counselors note that most young adults who come to them for help have no concept of a budget. They don't know how to develop one, much less how to make one work. They're biggest concern is living from one paycheck to the next and have no financial objective or goals.

Young adults should use a checking account. A checking account gives them an orderly method of controlling their spending, giving, and saving which provides a record of payment.

Resources That You Can Use

Here are some resources that you can use in learning and training your children about money. Select the option by clicking on it.

Growing Money: A Complete Investing Guide for Kids
Money Sense for Kids

I have provided some additional links for other articles on finances below.

For budget planing. Click Here!
How Money Works. Click Here Now!
Marriage and Money Tips. Click Here!
Wedding Activities And Budget Plan. Click Here Now!