Teaching Children Financial Responsbility

“I want candy shouted the young boy”, as he and his mother approached the checkout counter.” “Not today,” said the mother, “no candy today.” “Money does not grow on trees,” said the mother. Does this scene sound familiar to you? Teaching children the purpose of money, where it comes from and how it is accumulated can be a challenge. With so many other things to teach our children, financial literacy is often neglected. When do we start teaching children about money? Financial literacy should start as early as possible. When we give children the money to pay for an item at the store or we pay for it ourselves, children have no “stake” or attachment to that money. Start by taking your child to the bank with you, introduce him/her to the bank’s president and staff, and show him how you add and subtract money from your account and how you write checks to pay bills. (The same principle can be applied if you bank online and/or use your debt card to pay for purchases).

Let your child know that you get money out of the bank because you put money in the bank. Money received from chores, birthdays, and allowance is an excellent time to start teaching money management. Have your child label three containers (banks) short term, long term and church and/or donations or save (invest), spend and give. Help him determine how much to put in each bank. Short term money can be used to pay for items they want to buy. When an agreed amount of money is in the long term account, you can help them start investing. When one bank is empty explain that money will not be taken out of the other bank to cover the “shortfall.”

Starting money management early can help develop discipline, patience and establish ownership and responsibility of money usage. As you teach and observe your child, your child will also observe how you manage your money.