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As parents, we know that a quality education is important for our children’s futures. But teaching kids how to manage their money wisely is a valuable life lesson, too.
Despite our best efforts at home and in school, other influences—like advertising and peer pressure—tempt even very young children to spend what money they have on the latest toys, gadgets, and fads with false promises that they’ll be happier, better looking, or more popular. That’s why it’s important that every child be taught the importance of saving at an early age, starting with some basics about money
What is money?
While kids have seen paper bills and coins, they also see grown-ups using checks or debit and credit cards, and may not associate those means of payment with spending “real” money. Be sure to explain how funds in a bank account ultimately are connected to each.
How do we get money?
You may find yourself telling your kids, “Money doesn’t grow on trees!” But do you take the time to explain where it does come from? Be sure kids understand that it takes hard work to earn money. Demonstrate that principle by giving them an allowance that’s tied to completing certain household chores.
What can we do with money?
Teach children that making good choices about how much to spend and how much to save is important. Explain the importance of saving: for a specific goal, for the future, or just for a “rainy day.” Help them make a simple budget of spending and saving.
What are needs vs. wants?
Once you’ve shown them that only a portion of their money should be spent, it’s important to teach them how to make smart choices about what to spend it on. Describe the difference between “needs”—those things we can’t survive without—and “wants”—the things we like but can live without.
What is a bank?
Once kids start to save a portion of their money, it’s time they open their first bank account. Be sure to take them with you—rather than depositing the money for them—so they see first-hand what a bank looks like and understand that the bank keeps their money safe.
What is interest?
Interest can be a tough concept for kids to grasp, but at an early age it’s enough for them to think of it this way: Interest is money a bank pays you as a “thank you” for saving your money there and it helps your money grow