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Teaching Children about Money: Ages 4-13

May 28, 2020 By: Great Midwest Bank

Teaching children about money and how it works can be fun in addition to being valuable. It’s up to you to decide when to begin teaching your children about money, but it’s also important to be prepared should they start asking questions about money. After all, if you don’t teach your young children about finances, who will? The following money tips will help get you prepared so you feel confident teaching smart financial habits.

You don’t need to be a financial expert.

Keep it simple and fun at first. One of the easiest you can do to get started is to just count pennies and other coins with your child at the kitchen table. Then help them put the coins in a piggy bank or some other container when you’re done. Ask a question such as, “If we put more pennies in there tomorrow, will we have more or less money?” 

Consider an allowance – and split it up.

Earning an allowance is one of the best ways to teach kids the value of money and begin instilling the importance of saving. Around the age of 10, incentives for helping complete simple tasks like emptying the garbage, putting away the utensils from the dishwasher, cleaning their room, or other simple but necessary chores. Chores are a natural way to adapt your child to the working world. You can also allocate an allowance into different buckets such as savings, spending, and charitable giving. Consider the use of labeled envelopes or piggy banks to split the allowance every time and have them contribute at church or a local charity in person to reap the emotional reward of supporting a cause.

Share lessons from your own experiences. 

We’ve all made mistakes with our money, either spending too much or not saving enough. Whatever it is, we often learn from these situations. As your child approaches their teens, sharing stories about your past money mistakes and successes with children can help them learn lessons faster without having to make the same blunders. These stories can be as complex or as simple as you want, depending on the child’s age and personality. Stories are also an easy way to connect with children and to pass down family history as well as money values. Begin to show them that long-term saving like creating a college savings account builds over time. 

Inspire entrepreneurship.

Around the age of 12 or so, your child might have saved enough money to buy something they really wanted like a new toy. However, if your child doesn’t quite have enough, use this opportunity as a learning experience. Resist the impulse to simply give them the amount they’re short. Instead, help them think of ways they can earn extra money and inspire entrepreneurship. This can help give them the confidence to solve their own problems, as well as develop a better appreciation for money. This experience will also help your child evaluate whether or not the item they want is worth the extra work.

By this point, your child may be able to understand the following:

  • Money is directly tied to items• Parents work for money• Money is spent differently — either immediately or over time• Some purchases are made without physical money (checks, credit cards, mobile device)

Set up a bank account.

Once your child is old enough and has a good understanding of concepts like earned interest (again, this will vary for each child), you can make a visit to Great Midwest Bank to set up his or her first bank account. Go one step further by using our Mobile Banking App. It’s a handy tool for depositing birthday checks. It’s also a quick way to show them how much is in their account. When they know how much money they have, your child will feel more in control. Rename the account with their first name so they can see it online. By helping your children understand these concepts at an early age, you can ensure they have plenty of practice.

Find your balance.

We know some parents think it’s inappropriate to discuss their finances with children. Sharing detailed information may lead to anxiety or stress. It’s important to find the right balance so that your children are aware of the things they can do to improve their finances. While money will become a bigger part of their lives when your children are older, you shouldn’t put money ahead of more age-appropriate worries, such as school or developing social skills.

Lead by example. 

We love our kids and want the best from them. One of the best things you can do for them is teach them how money works by practicing what you preach. If you teach children the importance of savings accounts and budgeting, you should make it a point to save and plan out a budget, too. Invite them to see how you plan and adjust your finances. It teaches them financial discipline and holds you accountable. It’s a win-win! 

If you want to learn about teaching children about money, we invite you to check out our 4 Reasons to Use A Piggy Bank article. Great Midwest Bank is a family-run, community-focused bank here to help you and your family. Stop by one of our convenient branch offices if you have questions or want to set up an account for your child.

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