Teaching children about money can be tricky, especially when talking to younger children. But it's never too early to start. It's important that children understand what money is, how it's earned, how's it's spent, and how to use it wisely. Financial literacy is an often overlooked subject in our public school systems, so, as parents, it's up to us to teach our children the basics of money management.

Our Social Media Coordinator, Carly Cherry kicks off this 3-part "kids and money" series with part 1, Teaching Kids the Value of Money.


Transcription:
Welcome to Personal Finance 120 – information for managing your financial life in about 2 minutes. I’m Carly Cherry with Cambridge Credit Counseling. Today we’re going to discuss some of the best ways to teach your children about money.

(On-screen graphic: What is money, and what does it do?)

It’s never too early to start teaching, but if your child is very young, you may need to explain what money is. If the easiest way is to say that you give money to the cashier and they give you things, that’s fine. The concept of value can be taught through role-playing: use small bills and let your child take turns as customer and cashier, counting out the amount of each purchase.

(On-screen graphic: How do you earn money?)

Now you can begin to explain how money is earned. You can demonstrate this by having your child do small chores they don’t usually do, like setting the table or taking out the trash, and “paying” them a small amount of money for each task. It’s better to avoid paying for grades or behavior, which are expected to be good, but that rule isn’t set in stone. You want to avoid paying an allowance for chores your child already does. You don’t want them refusing to do chores because they think they have enough spending money at that particular moment.

(On-screen graphic: How to use money wisely.)

This next step is hard for some parents, but try and give your child the opportunity to spend their own money. Let them decide what’s worth their money and what isn’t. They’ll sometimes make decisions they regret, so don’t miss out on that teachable moment. Buyer’s remorse is one of many consequences they need to understand.

(On-screen graphic: Needs vs. Wants)

Identifying the differences between wants and needs is as challenging for children as it is for many adults. There are many things that adults find hard to cut out of their budget because they enjoy it too much. To introduce this concept of needs and wants, as you make your way through the grocery store, ask your child whether the family needs an item, or simply wants it. Explain to them that milk is something we need to be healthy, while cookies are something we don’t really need.

(On-screen graphic: Borrowing Money: Credit and Debt)

Teaching the concept of credit can derail your efforts if you’re not careful. Next time you’re in a store and you know your child doesn’t have their allowance with them - or when they’ve already spent it - if it’s reasonable, offer to let them borrow the money from you. Afterward, make sure they pay you back as soon as they have the money available. You don’t want them thinking you have a limitless supply of money they can tap into at any time.