Last week we discussed a LearnVest article about money management lessons from children’s summer activities. These tips were for grade school and beyond but you don’t have to wait for grade school to introduce financial planning to your children. LearnVest also offers advice to start the smallest children on the path to sound money management.
Connecting Money and Work: The article quotes Danny Kofke, author of A Bright Financial Future: Teaching Kids About Money Pre-K Through College for Life-Long Success!, as saying that even three-year-olds can “do a few basic chores around the home for pay.” Now lest this starts a debate over whether children should be paid for chores, he adds that some chores should be done (for no money) because everyone in the family needs to contribute. Paying kids for some chores can be part of a conversation about how you also work to earn money.
Children learn about different jobs but it is possible that they may not connect work to earning money. You can talk about jobs that people do to earn money. You can also note that sometimes people work for no money (parenting, volunteer work).
Budgeting and Saving: Children who are not yet in kindergarten can start learning about budgeting. You can help them figure out how much of their earnings (allowance, gifts from relatives) they should spend, how much they should save for something they want, and how much they can give to charity.
You can do this by having them divide their money into separate containers or by using a product designed for this, such as the Money Savvy Pig.
Estimating Costs: You can start early getting children to understand that different things cost more than others. You can have them guess how much items in different price ranges cost, “you may also want to expand the conversation, talking about why a bike might cost less than, say, a car or even a house.” This can lead to discussions of why people have to work and save to buy certain things.