It’s never too early to teach kids about money

If you want a good laugh, ask a four year old, “Where does money comes from?”

Most will tell you money comes in a magical endless supply from the ATM, you silly grown-up. With all of us using debit cards to make purchases most young ones seldom see actual dollars changing hands.

This means it’s more important than ever to teach our children about money. In fact, I believe teaching kids to be responsible about money is one of the most important jobs we have as parents.

The most important concept to teach is that money is earned. Since it’s unlikely anyone is going to give them money just for being cute when they’re adults they should embrace the concept of working for their money now. The next important concepts to teach are how to save and how to thoughtfully spend.

Giving an allowance is a controversial topic. Some believe that the allowance should be tied to doing chores around the house.

Others believe kids should help out around the house simply because they’re part of the family and they shouldn’t expect to be paid. Whatever camp you’re in, remember the only way kids can learn about money is to have some, so use their allowance as a teaching tool.

So, how early can you start to teach kids about money? It’s never too early as long as the lesson is age appropriate. Every child is different but here are some guidelines.

Preschool – As soon as the kiddies can count they can enjoy watching money accumulate in a piggy bank where they can see and touch it. This is important because kids are so literal. They can learn to identify money in its various values, paper and coins. They can also learn to differentiate between needs and wants to prepare them for spending later.

Primary school – Now you can teach kids to save up for purchases. An example - to buy that toy I’d have to save up three weeks allowance. This teaches the value of a dollar by putting it in a perspective they can understand. You can also teach comparison shopping. The grocery store is filled with teachable moments so let them help you grocery shop. Involve them in getting the most value for your dollar by comparing prices, looking for sales and using coupons.

Tweens - Increase responsibility with a saving account and make sure they look at the monthly statement and keep track of their account. They can learn to budget and should be encouraged to purchase gifts for birthdays and Christmas with their own money. Encourage them to earn money beyond their allowance by doing paid jobs for others like yard work and babysitting. They should also know the difference between debit and credit cards.

Teens - Along with a first job should come a checking account. This is when you get to explain about gross pay versus take-home pay. You can also discuss the use (or avoidance) of credit cards being sure to explain interest rates, charges and payments. Discuss credit scores and the importance of establishing good credit.

While we’re at it can we teach our kids to count change? A skill sorely lacking in the youth of today.

Don’t get me started.

Food for thought contributed by Patti Diamond, author of Divas On A Dime – Where Frugal, Meets Fabulous! Facebook - DivasOnADimeDotCom www.divasonadime.com