In Children and Money: Teaching Children Money Habits for Life, a journal published by University of Minnesota, Sharon M. Danes, PhD., professor, department of family social science, and Tammy Dunrud, owner of Tammy Dunrud LLC, said that teaching your children about money was not like preparing them for employment or teaching them to save some of the money they earned.

Here are four guidelines to teaching children about money:

Teach them at an early age

To understand money may take a lifetime, but it is important for children to develop the knowledge since early age. According to Parents Magazine, very young children (at early age of two and three) will not fully understand the value of the money, but they can identify the shapes and colors.

“By exchanging play money for goods, your child begins to understand the basics of commerce," said Dr. Dorothy Singer, Ed.D., a senior research scientist at Yale University in New Haven, Connecticut.

Differentiate the lessons 

In her journal Children and Money: Teaching Children Money Habits for Life published by University of Minnesota, Sharon M. Danes, Ph.D. stated the importance for parents to use examples or activities that match the child’s stage of development, not necessarily the child’s actual age in years.

For example, an 8 -year-old may not be understand how to make a budget for their pocket money, but a 13-year-old may start thinking about investing by not spending it too much on a daily basis and buying more expensive items in the future instead. 

Do it daily

Children learn through copying, observing and following examples on what they see and hear everyday, so it is important to teach the lessons on a daily basis. Parents can involve them in discussions and decision-making, or include them in planning.

In the journal, Dunes said that as parents teach children about money, they can learn about responsibility, family values and attitudes, decision-making, comparison-shopping, setting goals and priorities, and managing money outside the house. 

Support them to be financially independent

As children gain more understanding about money, it is important to prepare children to become financially independent. Apply a reward system, so they are used to doing something before they can get a treat. Let them make small purchase mistakes like buying cheap toys that can break easily, so they learn how to make the right decision on spending money for the right things.

Teach about the values of money

Dunes underlined that parents should make them understand the positive and negative meanings of money, and also conflicts money can cause make so they can spend money wisely. Once children reach an age that can understand about responsibility, it is wise to start giving pocket money and help them manage it.

It is also important to teach them how to control their desire to make purchases, prioritize their spending, or save money to get rewards later. Another most important factor is introducing the consequences and norms of borrowing money. (asw)