Surely you have already told your children that they have to know how to choose how to spend their pocket money; that they often have to wait to get what they want; or, when the money they receive does not reach the end of the month, that they have to know how to manage that responsibility and do better for the next one.
Although pocket money is an important instrument of financial education, it is necessary, during the different stages of children’s development, to teach them a set of concepts that will help them to manage this monthly amount – not least because this is not an innate ability.
It is advisable that this sensitivity is developed from an early age so that, later on, they can make the best financial decisions for their lives. In other words, that they become autonomous and financially responsible adults. In theory, it seems simple, but in practice things are always a little more complex. In fact, it is natural that many parents have doubts even in the smallest decisions.
We don’t have absolute answers (and truths) to these questions, but we can share with you some ideas that we have been thinking about and that may contribute to your children’s financial education. We have prepared, for such, a guide (by age) that approaches the subject and from which you can clear up some doubts on how to teach your children the value of money.
It is important to stress, however, that dialogue (and example) will always be very important in this process. Make time not only to talk calmly with your child, but also to clarify any doubts that may eventually arise.
Guide to teaching children the value of money
Teaching children the value of money is a process that goes through several phases depending on children’s needs, abilities and understanding. Therefore, depending on their age, the methods will change and the child’s responsibility in the process will tend to grow. This is our proposal of how you can teach the value of money to children, considering their age.
Teaching the value of money to children aged 0 to 2 years
Even before a baby is born his parents will have made some kind of plan for his financial future. Often, this means opening a bank account which, over the years, will be increased at appropriate times so that the money can be put to good use through the profits offered by the banking institution.
This first step, during which the baby will not yet have any notion of money, is, for a long time, a demonstration of the parents’ commitment to the process of teaching children the value of money, showing their concern for the future of their savings.
Teaching the value of money to children aged 2 to 6 years
From the age of two, however, teaching children the value of money is no longer a one-way process. From this age onwards, children should be involved and be part of key moments where their parents’ behaviour regarding money is present. Learning by imitation and absorbing the parents’ principles, the child can be present at moments where financial management is done, and the notion between desire and need should be explained.
Children’s tales where the need to save is evident (for example, “The cicada and the ant“) will be good for the younger ones to understand that it is important to manage assets. In the same way, you can gradually begin to impose this idea by giving your child a piggy bank and occasionally giving him coins so that he starts to “save” on his own.
At this stage you can also include the question of money in the playtime. Simulating situations, such as going to shops, including the part about paying the respective bills will give your child a better idea of how the economy works.
Teaching the value of money to children aged 6 to 9 years
The start of primary school corresponds to the phase when children really start managing money. Many parents start, at this stage, the habit of a weekly allowance, which should always be given on the same day and as a reward.
The management of this pocket money is left to the child, but it is important that the objectives are clearly defined and that the child is not given any more money, so that he can better understand the limits of money and that it is not an inexhaustible source.
Teaching the value of money to children aged 9 to 13
By this time, the child will have begun to understand that money does not come easily and that one cannot acquire everything one wants without a moment’s introspection. Still, at this age, it will be a good phase to reformulate the issue of desire and need, explaining that not everything can be acquired, being fundamental a decision making based on effective needs.
Furthermore, at this stage it is important that the child starts to understand the value and price of things, taking several aspects into consideration: is this product essential for my life?
Is this product worth it, considering that it brings less quantity? Is it worth buying the branded product if the white label one is cheaper? These are exercises you can do by talking to your child on trips to the supermarket. Around the age of 11, to make the process a little more difficult and to force your child to manage his or her money, you can turn your weekly allowance into an allowance.