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Early Childhood Division Home
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Children and MoneyFamily Talks About Money • Make Allowance Work • Learn the Value of Money Teaching children to manage money is not easy, especially with the changes in financial markets and parental anxieties about financial resources. As a parent, you teach your child how to use money and make wise decisions. Your example is the best teacher for children. Piggy banks and children can become a wonderful combination for parents to use to being to teach the basic money management principles of getting, saving, spending and sharing money. For children's activities, go to the Got Money page of the KidsARUs web site. In this section, children will meet The Cash Kids, Chris and Connie, and learn more about getting, saving, spending and sharing money! Family talks about money strengthen management skills Parents can teach money management to children in a family council meeting. This is a time when all family members talk about their needs and wants and what they can afford to do as individuals as well as members of a family. It is a good opportunity for children to see themselves as "partners" in the family business of managing available family income. The main benefit of a family council is to help your child understand that spending is governed by income and YOUR individual family's situation and needs and NOT by what someone else spends. When the family council is implemented on a regular basis with open, honest interactions, both parents and children come to better understand one another. A child does not need to know exactly what parents make or owe. Children should be given a general understanding of the family income-its principal source and its main expenditures. These discussions should be kept cheerful, free and matter-of-fact. The topic of family spending and finances should not become too great of a responsibility for young children. Remember that no two families are alike; so, no hard-and-fast rules can be provided to help teach children learn money management skills. However, parents should be good managers of money. The kind of financial responsibility children find in their own home will exert a powerful influence on their adult attitudes toward the use of money. The family council is a good way to teach children the value of saving for a definite purpose, instead of saving for the mere fact of saving. Teach children that borrowing money costs extra and must be repaid. Show children that by going without something now, greater satisfaction may be gained later. Discuss things that the family may want to purchase or do in the future. Talk about whether this is a want or need, and how to set financial goals that will allow the family to purchase the item or activity. Then discuss how these goals may be met, either by reducing family expenses or increasing family income. Children are not born with "money sense." They learn by what they see, hear and experience, and parents have a very strong influence on all of these. Childhood is the appropriate time to learn about money management while parents are able to provide them learning experiences that will benefit them in years to come. Family councils are an excellent way to help children learn how to manage money by helping them understand what money means, how to make wise and satisfying choices, how to use money to get things important to them, and how to have money on hand for daily needs as well as for emergencies and future needs. Find out more about financial management at your county office of the Cooperative Extension Service, University of Arkansas. How to make allowance work for children Children need to have money of their own to learn how to manage it. An allowance is a better teaching method than simply giving children money upon their request, says the Cooperative Extension Service, University of Arkansas. An allowance for children should be a set amount, should be paid regularly, and not tied to regular tasks required of the child. When deciding on the amount of an allowance, discuss what items will be covered. The amount should be enough that the child has money to manage with no strings attached. Money should not be used as discipline, such as for good grades or doing household tasks. If money is used in this manner, a child will get the idea that everyone and everything has a price tag. And, money should not be used to buy love or substitute for companionship. Both children and parents must work to make an allowance a learning experience. Be sure to praise any successful efforts. Let the child know when he or she is doing a good job in managing his allowance. Remember, a child learns from mistakes. Be consistent with payment and of what the allowance is to cover. Naturally, unexpected situations will arise. Use these as teaching opportunities. Guidance is helpful, but don't be a dictator. Avoid directing every step of a child's spending. Critical supervision may make him or her uneasy about money and less confident in managing it. Be flexible. An allowance requires a few rules for management. However, avoid being too rigid. Don't worry if a child seems to lack "money sense." It takes time to learn to manage effectively. Try not to over-emphasize mistakes. When a child makes an unwise purchase with his allowance and later regrets the purchase, avoid saying, "I told you so." Expect some errors and realize that mistakes can be excellent teachers. Parents should acquaint children with the general state of the family's financial affairs. If there is no money for many of the things the children want, they should understand why and be presented affordable alternatives. Help a child understand that adults, as well as children, can't have everything they want. We all must choose what needs and wants are achievable within the limits of the resources available. Remember, each child differs in temperament, development, learning ability and approach to money. Even children of the same age may be entirely different in their feelings about money and in their abilities to manage it. For more information on children and money management, contact your county office of the Cooperative Extension Service, University of Arkansas, and ask for a copy of the fact sheet, "Children and Money" or view it online.
How to help your children learn the value of money The National Center for Financial Education recently reported ways for parents or grandparents to teach children the value of money, according to the Cooperative Extension Service, University of Arkansas. For instance, as soon as children can count, begin teaching them about money. Repetition and observing others are two ways young children learn. Be sure to talk with children about your values concerning money, including saving, investing and spending. Discuss goal setting. Help children learn to distinguish between wants and needs before you discuss goal setting. The benefits of saving to achieve goals provides built-in motivation for the child. Teach children to save instead of spend. Explain to them the concept of earning interest income on their savings. Consider paying interest on money they have saved at home. Help older children calculate interest so they can see how fast money accumulates through the power of compound interest. You may want to take children with you to a bank or credit union and open a savings account. Beginning a regular savings habit early is one of the keys to savings success. Many financial institutions have youth programs that encourage savings and reinforces what you teach at home. Don't refuse all requests to withdraw from savings for a purchase or to reach a goal; you may risk discouraging savings all together. Help children learn to keep good records of money saved, invested or spent. Establish a system for each child. Envelopes for each month and a larger envelope for the year may be used to keep receipts from all their purchases. They may also make notes on the envelopes about what was purchased, dates, costs, etc. Use a calendar and establish a regular schedule for family discussions about finances. This is especially helpful to younger children. It can be the time when they count their savings and receive interest on their savings. Discussion topics could be the difference between cash, checks and credit, wise spending, the cost of borrowing and paying interest and the advantages of savings and investments. Teach children the disadvantages of borrowing and paying interest. You may want to charge interest on small loans you make to them so they will learn how expensive it is to use someone else's money. Teach children how to evaluate ads on TV, radio and in print. Will the product really perform and do what the commercials say? Is it really a sale price? Are there products available that will do a better job, perhaps for a lower price? Teach them that just because something looks expensive doesn't mean it is the best value. Stress to them that if something sounds too good to be true, it usually is. Teaching young people about money is a privilege as well as a responsibility. Schools cannot be relied upon to teach children your values about money and its use. Parents who don' t begin teaching their children about money at an early age could end up paying for that mistake for the rest of their lives. The Cooperative Extension Service has several publications that offer information and suggestions. Children and Money and Dollars & Cents for Youth, a self study program for parents, are available at your county office of the Cooperative Extension Service, University of Arkansas. See other related topics for children and money |
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