While it may seem you have more pressing priorities than teaching your child to be a smart spender and saver, keep in mind that the consumer culture is working on your child already. “Kids are constantly being bombarded with messages to spend money, and we need to counteract that,” says Sam Renick, financial consultant and children’s author. “The earlier kids start developing good money habits, the better.”
The good news? Teaching your child how to handle money is simpler – and more fun – than it sounds. Here are seven tricks to turn money lessons from a fight into a delight:
1. Hand your preschooler a buck.
Just because a child can’t change a dollar yet doesn’t mean she shouldn’t experience the dollar itself. Exposing children to money sets the groundwork for financial literacy in the same way that reading out loud to them sets the groundwork for literacy.
In the preschool years, some hands-on experience is enough. Preschoolers learn best when they can actually hold what they’re learning about. So get over any germophobia around coins and bills and let your 3-year-old hand a fiver to the cashier. Let your 4-year-old help you drop spare change into a savings jar. Pretend games like “store” or “bank” are also a fun way for preschoolers to grasp that money buys things.
And don’t stress if she confuses a penny with a dime or if you catch her using a stack of play money for a doll bed. At this age, it’s all good.
2. Dispose of “disposable thinking.”
From broken toys to outdated TVs, almost everything gets tossed in our culture. By teaching your child the value of things, you set a cornerstone of financial literacy. “Kids can learn that possessions deserve our care. If your child throws a book, explain that throwing books can damage them, and that treating them gently helps them last a long time,” says elementary teacher Laura Gerrity.
If something does break and your child cavalierly says, “It’s okay, we can just get another one,” take advantage of the teachable moment. Gently explain that replacing it would cost money, and that you’ll need to decide whether spending that money is a good idea. This may lead into an interesting discussion of all the other things that cost money, such as food, rent, and gas.
When your child outgrows some clothes, ask her to help you wash and fold them so they can be passed along to a smaller neighborhood kid or to a family shelter. Shifting from a “break it, chuck it, replace it” attitude to a “waste not” attitude can help even young children build a foundation for sound money habits.
3. Encourage delayed gratification.
“I want it now!” How many times have you heard that – this week? Kids by nature want immediate gratification, but learning to wait is vital. “The ability to hold off, to not have to have something right away, is a building block for when kids eventually do understand money,” says Jerlean Daniel, deputy executive director of the National Association for the Education of Young Children.
Learning to wait can be taught even to kids who aren’t using money yet. If your child requests a glass of milk while you’re sweeping the floor, don’t immediately put the broom aside. Explain that you’ll get it when you finish. If she requests yet another princess outfit (even though she already has several), suggest that she put it on her birthday “wish list.” “Creating opportunities for delayed gratification is one of the best gifts parents can give their children,” says Sharon Lechter, coauthor of Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money.
Around age 5, kids can start practicing with money itself. “Start with a short waiting period,” advises Laura Busque, Outreach Manager for the Ohio Credit Union League. “For example, help your 5-year-old save up for a Popsicle or piece of candy. Give her a quarter and explain that next week you’ll give her another one, and that you can then go out and get the treat.” Alternatively, you can have her earn the money by doing an extra chore.
As your child gets older, her capacity for waiting will increase. When your grade-schooler requests a new gadget, tell her that she can’t have it right now but she can save up for it if she really wants it, and help her plan how to save the money. You’ll probably hear more whining up front, but your child will get a boost of self-esteem when she does manage to get what she wants on her own.
4. Table the taboo.
Some feel it’s inappropriate to discuss money with children, but experts say kids benefit from being in on the discussion. Otherwise, they may develop misperceptions like thinking that a debit card never runs out of money or that if you break something, hey, you just go get another one. “You don’t have to be afraid to share money concepts with your kids – even if you’re having financial challenges,” says Lechter. “Think of it as a chance for the whole family to learn new skills together.”
Day to day, this can be as simple as talking out loud. “While withdrawing money from the ATM, you could say, ‘I put money in the bank earlier, and now I’m getting some of it back out,’” says Philip Heckman, director of youth programs for the Credit Union National Association. “This conveys that money doesn’t come out of nothing.”
When out shopping, explain your thought process: “If I buy this beautiful tablecloth, I won’t be able to pay for gas for the week. Gas is more important than the tablecloth, so I guess I’ll have to skip the tablecloth.” These kinds of comments show that there are times when the best spending decision is not spending.
But keep things cool and casual, and don’t push the point. “Many brief explanations work better than a few, long money lectures,” Heckman explains.
5. Be a role model.
What you do will have a much greater effect on your kids than what you say. If you want your child to learn to save, make sure you’re saving some money yourself – and that your child knows you do it. If you want her to learn the value of generosity, consider: Are you donating to charity or volunteering your time for a cause? Involve your child in these activities, too.
6. Let them practice.
Learning good money management takes practice. So invest in a little play money (or make some!) for your preschooler so that she can play “store” with you, and consider giving your big kid an allowance.
Piggy banks are a good idea, even for kids who don’t have an allowance yet. Your 5-year-old may surprise you by finding a “lucky penny” and immediately dropping it in her bank. Even if she doesn’t understand the concept of saving for a goal, she’s practicing saving – and that’s a great start.
7. Skip the lecture – tell a story instead.
Give a lecture on responsible spending, and you’ll get a glassy-eyed stare. But tell a story about a boy who must decide between buying lunch and buying a new action figure, and you’ll likely get rapt attention. “When I use stories and music to break down the concepts, the kids really get it,” says Renick.
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