The next time your child throws a tantrum in the toy aisle, think of it as an opportunity to dust off that piggy bank and teach them a few things about money. According to Forbes magazine, kids as young as three years old can understand what those dollar signs stand for. Parents can play an important role in guiding the development of financial intelligence early on. Here are a few basic ways to teaching kids about money.
Retail rewards:Going to the mall to pick out a birthday gift for a friend can be a lesson in budgeting, especially if the gift bearer can find a way to get something out of it. Instead of getting talked into purchasing a consolation prize for the giver however, parents can encourage him to budget by letting him choose a (reasonable) present, then keep the leftover funds from a fixed amount that was allocated for the gift.
Be consistent: Kids may insist on a purchase when something catches their eye while trailing behind errand-running parents. Parents who cave just once will confuse the child and make it difficult to extinguish unwanted behaviors (aka tantrum outbreaks). This may be difficult at first, but with consistent refusals, the whines will dissipate.
Explain, don’t ignore: The best time to get kids motivated to set a goal to save is when they have their heart set on something. Although the parental fight-or-flight response may kick in at the store during a tantrum, time at home after the episode can be used to set a tangible goal to acquire the funds for the said item. Parents can help kids put aside a container labeled with the name of the coveted toy and talk about a plan on how to make the purchase happen.
Help kids practice earning: Until trees sprout dollar bills, everyone must resort to earning them. The earlier kids understand this, the more attuned they will become to finding ways to use their skills to do so. Parents may want to create a chart of odd jobs around the house that they’re willing to pay kids for doing, such as raking the leaves. Chores like making the bed or designated family chores, like taking out the trash, should be separate from extra odd jobs parents choose to reimburse for as daily and weekly chores teach kids personal responsibility.
Make grocery shopping a fun lesson: Have kids find the cheapest version of a favorite cereal or fruit. Reward kids for helping with smart shopping decisions by doling out some of the leftover change.