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If you want your children to grow up knowing about money, much of what they learn will be up to you. Whether you have an easy, compliant kid or a strong-willed child, the best approach to teaching them tends to be in bite-size pieces. One small lesson, reinforced in fun and positive ways, may just stay with your child throughout life.
If you’re not sure where to get started, we’ve developed this easy-to-follow 12-month guide.
January: Money truly does not grow on trees
If you ever rolled your eyes after a parent or grandparent reminded you that money does not grow on trees, you’re not alone. Most of us heard that little nugget of wisdom a time or two.
One way to begin teaching your children that money does not grow on trees is to talk about how your family gets money to pay bills and do the fun things you do.
You can reinforce this idea by offering your child a small allowance in return for completing specific chores. If they don’t complete the chores, they don’t earn an allowance. What those chores are and how much the allowance is should be based on the age and capabilities of the child.
February: A budget as GPS
If you’re comfortable, show your child the monthly budget you use to keep your household running smoothly. You don’t have to go into the details, but explain that a budget is like GPS, reminding you of where you want to go.
Help your child create a budget of their own. Let’s say the most your child can earn in a given month for doing their chores is $10. Ask them to break that $10 down into how they’d like to spend it. Assure them that their budget may change over time as they earn more money or their priorities change.
March: The difference between wants and needs
This is a tough one, even for adults. One way to introduce the idea of wants versus needs is to create a list. If you have a 7-year-old, the list may look something like this:
- School clothes
- New fidget toy
- Video game
- Lunch money
- Shoes
- Soccer ball
Include as many things as you can think of, and be sure to include the types of toys and activities your child enjoys. Make a game of it by asking your child to go through the list and tell you which are needs and which are wants.
April: How money grows
Once your child has earned an allowance, tell them you’ll hold their money for as long as they would like. However, for every month they leave it with you, you’ll pay them 2% interest. If they give you $10 to hold, they’ll earn $0.20 the first month. And because they now have $10.20, they’ll earn $0.21 the following month (we’re round up here).
The point is to help them understand that, like you, some bank accounts pay interest. The longer the child leaves the money on deposit, the more interest they’ll earn. Further, the interest they earn will earn interest of its own.
May: How credit works
The flip side of teaching a child how money grows is to help them understand how credit works. Let them know that if they want to spend money they haven’t earned, they can ask you for a loan. However, it’s going to come at a price.
Explain that they’re going to have to repay the money plus interest. You’ll want to set a strict limit on how much they can borrow so they don’t get in over their heads.
June: The world is an expensive place
Any time you’re in a store with your child this month or thumbing through a catalog, challenge them to guess how much an item cost. If they’re within $1 of the correct price, they get one point. If they’re within $2, they get two points, and so on.
The goal is to see who has the lowest score at the end of the game.
July: Waiting pays off
Ask your child if there’s anything they’d like to buy but don’t have the money for. If they come up with anything within reason, allow them to save their money in the Bank of Mom or Dad. Since you introduced the concept of compound interest in April, set an interest rate you’ll pay each month that the money stays on deposit.
The challenge for the child is waiting until they’ve earned enough to buy the item they want. Whether they make it or not, it’s a great way to teach delayed gratification.
August: Money can be lost
Introduce your child to the stock market by playing an online game like The Stock Market Game. It gives your child a set amount of pretend money to invest. With your help, your child can choose stocks they believe are a “sure thing,” and find out what happens when a stock loses value.
September: Money gives you options
It’s easy to believe that money makes us happy. What money actually does is give us options. Each time your child wants to do something with their allowance, whether it’s spending, saving, or giving it away, remind them that the money they’ve earned gives them the option to make those important decisions.
October: Start a business
If your child is interested in earning money, allow them to use their allowance to open a lemonade stand, buy and resale chocolate at a mark-up, or any other endeavor that will be safe and instructional.
November: It’s okay to ask for help
If you have a financial planner, tell your child about that person and what they offer. Then, encourage them to come to you with any questions they may have about money. It’s okay to look up answers if you don’t know that answer right off the bat.
December: Giving is good for the soul
Studies show that some of the happiest people on the planet are those who are generous. Encourage your child to spend this month thinking of others and the role they might play in making someone else’s holiday season a little brighter.
The important thing to remember is that it’s the little lessons you teach throughout the year that are most likely to stick with your child.
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