The ABCs of Money–Teaching Your Children Fiscal Responsibility at Any Age

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shutterstock_116832574As someone who struggled with my finances early in life, I know it’s paramount that children learn sound financial habits as early as possible.

But when is early enough?

A good gauge would be to begin finance/money lessons as soon as your child can comfortably count. When your little pumpkin is beginning to belt out numbers and is fascinated by the idea of counting things, it is a perfect time to teach them about what dollars and cents really mean.

Allowances

Giving your child an allowance is a great way to help them learn fiscal responsibility at a young age. The key here is to make your child earn the money—just as in life, there should be no free handouts when it comes to receiving an allowance.

When giving your child money, make sure to give them small, realistic sums (there’s no reason to give them $50 just for making their bed—they should already be doing that for free anyway!). Take it one step further and give them the total sum broken down into smaller denominations. Five $1 bills certainly seems like a lot more to a child than one $5 bill. This is a perfect opportunity to teach them about the value of money (i.e. More bills doesn’t mean more to spend).

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Encourage your child to save, give away and spend their money wisely. Teach them the power of savings over the long term, help them learn how to make their dollars stretch further and show them the virtue of giving back to those who are less fortunate. All of this begins with a simple allowance.

Basics

As your child grows older, consider teaching them how to set up a budget and/or track their spending. If they’re still young, let them spend their money a few times to allow for tangible experiences with how it feels to spend all their money at once, to save for a big purchase or to not have enough for the things they want.

Also make sure to seek out teachable moments in everyday life. If you’re about to feed the parking meter, allow your toddler to do so for you while you explain how parking the car costs money. If you’re at the grocery store with your 10-year old, ask them to figure out how much of an item you can buy before going over your grocery budget (another opportunity would be to purposely go over the budget and ask your child which items to put back before you check out).

Communicate

As you teach your child about money and encourage them to learn financial responsibility, be sure to continually communicate. Share your own money values and goals as a way to inspire your child. And whatever you do, make sure never to argue with a spouse, other family member or friend about money in front of your child. Remember to model consistent, responsible behaviors for your child to adopt.

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Jen is the owner of The Happy Homeowner, where she writes about living a healthy, balanced life one cent at a time. Previously, she paid off $14K in credit card debt in less than a year and hasn’t looked back since. Follow along on Twitter with her financial, fitness and travel adventures @bthhomeowner!