Budget Sense

To my son, money seems limitless, and he believes it can fulfill all his desires. As he approaches 8 years old, it’s been a challenge to help him grasp the concept of money and impart important financial lessons. Though we’re witnessing gradual progress, it often feels like taking one step forward only to encounter two steps back.

So how do you navigate this complex world of money and kids, and how do you explain it in basic terms, at a time when they are still too young to understand most of it? Through personal experience and observing other family and friends, I have come to appreciate the following tips and lessons for helping your young kids understand, grasp and appreciate the concept of money and finances.

Start early

Don’t postpone this process until they’re already 8 or 9 years old, as they may become overly dependent or spoiled by then. Instead, begin discussing these concepts with them during their Junior Kindergarten (JK) or Senior Kindergarten (SK) years, or even in Grade 1. While you could potentially start earlier, at such a young age, the information might not stick. Keep in mind that every child is unique, and some might grasp the concept at an earlier age.

Show with example

Telling them is one thing, but demonstrating with real examples is even more effective. For instance, if they’re requesting a toy that costs $100 or more, explain that while you’ll try your best to purchase it, it would require a full day’s salary—equivalent to 8 hours of hard work—to save up for it. Attaching a time value to the cost can make the message more relatable. Additionally, you can share stories of other families, their professions, and the effort they invest in earning a living to provide for their needs. In other words, connect spending with the effort required to earn money.

Teach the importance of priorities

Your young kids have to know what is the priorities of a household: food, shelter and then come the non-essentials and wants such as toys, electronics, junk food etc. By reminding them about these on a regular basis, you help them understand how life works and that certain things we take for granted – food and shelter – are not free and we have to save and pay for them. In fact, I sometimes make it a habit to remind my son about how lucky we are to have money to pay for our house during bad weather days such as rain or thunderstorms etc. I tell him that because we work hard and save, we get to enjoy this house we live in, but some other people are not so lucky or haven’t been responsible enough with their money to have housing or even food.

Household errands for money

Assign them tasks suitable for their age and reward them upon completion. This introduces the notion of earning money through effort. Beyond that, it imparts the understanding of the time and dedication required for work, and that earnings are a result of genuine labor. This crucial lesson mirrors the realities of life, demonstrating that money is acquired through diligence and exertion.

Their own Piggy Bank

A piggy bank holds significant value for a child as it serves as an initial introduction to money management and saving. It teaches the importance of setting aside money for future needs or wants, promoting delayed gratification and responsible decision-making. The act of depositing coins and bills fosters a sense of accomplishment and ownership, empowering them to watch their savings grow. Additionally, it can initiate conversations about financial responsibility, setting goals, and the value of hard work. Overall, a piggy bank instills foundational lessons about money that can shape a child’s financial habits and attitudes as they grow. If you want to add a twist to this, consider introducing a piggy bank. Regularly contribute to it and even promise extra money when they complete tasks around the house. But here’s the catch: when the piggy bank is full and it’s time to open it, observe their reaction if you playfully—though seemingly serious—propose using some or all of the saved money to buy something for yourself, the household, or the family car. It’s a win-win scenario: if they agree, you’re dealing with an exceptionally generous child; if they firmly reject the idea, congratulations on raising a child who comprehends the value of money.

Encourage Charity

Last but not least, introduce the topic of charity to them, and show real examples of helping. For example, if you see someone on the side of the street asking for money, give money when your kid is with you and give a small lesson about why it is important to help others. Also important to relay the importance of saving money in order to help needy people like the homeless, disable or those less fortunate than us.

In conclusion, guiding children to comprehend the value of money is a vital parental responsibility. Despite the challenges that arise, the journey is a significant investment in their future financial well-being. Starting early, using practical examples, teaching the significance of priorities, involving them in household tasks for earnings, and introducing the concept of a piggy bank all contribute to their financial education. Furthermore, encouraging acts of charity instills a sense of empathy and responsibility, fostering a well-rounded understanding of money’s role in both personal growth and contributing positively to society. While the road may be riddled with ups and downs, these efforts lay the foundation for a solid financial outlook that will serve them well throughout their lives.