Teaching Our Children the Value of Money
There have been numerous occasions in the past where my children have asked for something they wanted without any thought of the cost and where the money comes from… Sound familiar?
When my oldest son was 6 years old, he asked for a $7,000 go-cart for his birthday. I laughed to myself and realized it was time to start a child-appropriate discussion regarding finances.
Specifically, where does money come from? And, how do we earn cash to buy what we want? My initial discussion was not as successful as I would have hoped as I noticed over time that it did not change much in my son’s way of thinking.
He continued to ask for items that were way beyond what we would ever spend for a birthday or Christmas gift.
I thought to myself that I needed to come up with a successful way of teaching my children a better understanding of the value of money so that they can live a financially successful life as adults.
Initially, children know very little about where money comes from and what it takes to earn the cash we have in our wallets or purses. At a very young age, coins and paper bills have no value to a child. You can give a $100 bill to a 2-year-old and they will most likely discard it as if it were no different than a piece of trash. (If they don’t put it in their mouth first!)
Over time, our children see these green paper bills and coins exchanged for preferred items and they start to gain an understanding that money can be used to get us what we want. Unfortunately, this does not carry over to understanding the value of money and the value of items we want to purchase.
So, how do I teach my child to have a better understanding that 'money does not grow on trees?'
What questions do we need to address, when do we address them, and how can we apply our answers to daily situations involving finances? So much to consider!
Children who have an understanding and respect for the value of money become adults who understand and respect the value of money. Not only is it important to talk with our children about where money comes from and how much things cost, but there are also active steps that you can take to teach your child the value of money.
In order for our children to value money, they need to understand the following:
- Where does it come from
- How can it be earned
- Spending wisely
- Saving prudently
- The relationship between hours worked, earnings, and the worth of items purchased
With older children, you can move straight to allowing them to earn money (ah, the good ol' allowance). I’ll never forget the satisfaction that came when I realized that my son finally understood. He came to me one day and asked for something that a friend of his owned, and that he really wanted. I told him that was fine, he’d earned money and he could spend it however he wanted.
He sort-of cocked his head to the side, thought about it, and decided he’d rather save his money for the video game he really wanted. Right then, I knew that he was finally grasping that when you work hard for money, and you only have so much of it, you prioritize how you want to spend it and THINGS start to have more value.