The best way to teach your child good money skills is through examples and daily life experiences.
A good age to start teaching your child about the value of money is when they are around seven years old. At this age, real-life examples can help children to understand why certain things have greater monetary value than other things.
A trip to the supermarket is a great opportunity to open this discussion. For example, start by showing them how much an apple costs. Then compare that to how much laundry detergent costs.
Explain to your child what goes into making an apple (seeds, harvesting, Nature!) and what goes into making laundry detergent (chemicals, processing, packaging). By explaining what goes into producing different products your kids will start to appreciate the value of different items in the marketplace.
You can also get them to help you comparison shop as their math skills improve. For example, show them the price difference between two cereals. The explain that your decision to buy may not be based strictly on low prices but to understand why you select one similar product over the other. Perhaps price is one factor, but also explain quantity, quality, flavor preferences, etc. and the way you balance the decision.
You can even explain the value different services have in the marketplace. On your next visit to the dentist, explain to your child what the dentist does and then let her know the cost for those services.
Then compare how much your dentist’s office charges to clean your child’s teeth in one hour to how much you might pay for someone to clean your home over three hours. Your cleaning service may be paid the same amount as your dentist even though the individual involved in cleaning your home may have to work five times as long to earn the same amount of money.
This service example teaches your child to understand not just money concepts but the value of different types of services and certain expertise. They will begin to learn how the marketplace values skills based on training, experience and accreditation.
You can also teach your kids a little bit about major purchases and how — depending on the cost of an item — people may choose to pay for certain things over a length of time. For instance, it would be very natural for your child to ask how much you paid for your house and how you paid for it.
If you have a mortgage you can begin to explain the concept of responsible debt to your child. Explain how, just as children can save their allowance money over weeks or months to purchase things they want, adults can pay for big ticket items over several months or years if their bank or lending institution decides to loan them that money.
Of course you’ll want to explain that decisions like this are not easy and that borrowing money to buy things is very different from saving your own money. You can explain that it is done only for convenience — like with a home — costing more than what most people have in cash at one time or would be able to save over a short period of time.
Don’t overwhelm your child with details and don’t expect them to get it right away. To be effective, money lessons need to be delivered on a casual and consistent basis. Drop one in when the timing is right and you can show why or how you make certain purchasing decisions for the family and home. By doing this, your children will learn to appreciate the value of money and what it can do in their lives.
Have you had “teachable money moments” with your kids? How did you approach it? Share your comments below.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net