Teaching Children the Value of a Dollar
Posted by Shana Albert on June 30th 2009 in Blog
Now-a-days it seems that children are more materialistic than ever. They have tons of video games, more than one game system, iPods, cell phones and designer clothes just to name a few. Much of the problem is some of the TV shows that are on TV. For example a show on MTV called “Sweet 16″ shows teenagers with the best clothes, shopping for brand new sports cars they want for their birthday present and planning their $200,000 birthday parties. Shows like this give children the impression that money comes easily.
I’m not saying that the answer to the problem is don’t let them watch these TV shows and don’t buy them the newest technology. But, I think that as a parent we just need to begin early on teaching our children the value of a dollar.
My mother was a single mother and an Assistant Vice President of a Bank when I was growing up. So, not only was I taught early on the importance of saving money, but because she was a single mother she was very, very careful on what money she spent. I watched my mother use labeled envelopes to budget and she was quite frugal when it came to buying our clothes. And, even though back then I would be lying If I didn’t say I was at times a bit jealous of other children owning a wardrobe filled with designer clothes and playing with newest gadget. However, as an adult I am thrilled that I was brought up with the financial knowledge my mother taught me.
Reasons to Teach your Children the Value of a Dollar
Without the money management skills my mother taught me early on I probably would have been very lost. I would have made plenty of money mistakes as an adult that could have cost me a ton of money. It is true that the mistakes you make teaches you important lessons. However, wouldn’t it be better to have your children make the mistakes as a child than as an adult? Of course. And, probably cheaper.
What can happen if you Don’t Teach your Children the Value of a Dollar?
Children might struggle with:
- Balancing a checkbook
- Splurging on Impulsive Buys
- Saving for their future
- Poor money management skills
- Maxed Credit Cards
- Bad credit rating
- Understanding the difference between wants and needs
Teaching children the value of a dollar is something that will last a lifetime and could save them from a lifetime of struggles. Could you imagine how difficult things could be for your children financially if they didn’t have these skills? Would they blow their entire paycheck? Would they be setting money aside for retirement? Would they be overdrawing their checking account every month? Would they max out their credit cards? Or worst… bankruptcy? I shudder just thinking of these things.
But, if you start teaching your children as early as possible the chances of these financial woes happening to your children diminishes. So, let’s get started on the “How to’s” of Teaching our children the value of a dollar.
Teaching Children Value of a Dollar
Many parents are very intimidated on how to go about teaching their children the value of a dollar. Many of us weren’t taught money management skills growing up ourselves…. how then get we go about teaching them to our children? I understand their concern, but even if you weren’t taught the skills growing up by your parents you can teach them to your children. Here are some How to’s to help you out.
How to Teach Children the Value of a Dollar
Kids allowance - Teach your child that if they want money they need to earn it. Give your child some chores and work out a weekly schedule. With each job completed they get paid a price that you have worked out. By the end of the week they will receive their earned allowance. They only get paid for the chores they completed. The more jobs they completed the bigger the pay.
Work ethics - When you work hard for your money you value it more. That is why allowance works so well in teaching kids the value of a dollar. But, in order to earn allowance children must work for it. Children, just like adults, appreciate money more when they have to work for it.
Difference between wants and needs - Teach your children the difference between a Want and a Need. A need is something that we must have to survive such as food, shelter and clothing. A Want is something that we would like to have, but we don’t necessarily need it to survive such as video games, sports car and designer shoes.
Be a good role model - Our children look up to us. One way to reinforce what we are teaching our children is to practice what we preach. So, make sure you are being a good “money management” role model to your children. For example:
*practice comparison shopping
*follow a budget
*think before you buyChildren’s Savings - We all know how important it is for us to save for our children’s future. But, I’m not talking about that kind of savings account right now. I’m talking about having your child open up his/her own Children’s Savings. When a child has their own savings it teaches them money management which is a MUST skill as an adult. Show your child how to keep track of their deposits and withdrawals in the register. They will enjoy watching the account grow as they add their deposits in their register and they will learn to really think about their purchases before they make a withdrawal.
Savings accounts earn interest. - Now that your child has their own savings account teach them that as their money sits in a savings account they earn interest. The larger the account the more interest they can earn. This is another benefit to them keeping their money in savings instead of spending it.
Pay allowance in small bills - This is especially helpful for the younger kids who use their piggy banks to save money. If you pay allowance in smaller bills they can take a few dollars and put it in their piggy bank and then use a couple dollars to spend. This way they are saving some money before spending it all.
Save all Coins - This is a method that I still use to this day. Teach your children that when they buy something to round up to the dollar. The change they receive in coins will then go into their piggy bank. Coins add up and when you use this method of rounding up to the next dollar when purchasing the coins can add up quickly.
Kids money management - Let them make some decisions with their savings. I know this seems kind of scary, but as I mentioned above let them make some mistakes now instead of making these mistakes as adults. Isn’t a $50.00 mistake much better than a $5,000.00 mistake? Of course. They will learn from their mistakes. If they spend money on something that lands up being a dud they will learn to think much harder and longer before they jump right into another purchase.
Teach them how to Balance their own account - Another responsibility of children having their own account is the balancing of it. Many adults don’t balance their checking accounts which leads to overdrafts. So, teaching your child how to balance their own account now is a good idea. And, the great thing about opening up a Children’s Savings Account is easier to learn how to balance a savings account then learning how to balance a checking account. So, if you use their saving account as a great balancing tutorial they will be pro’s by the time they get a checking account.
Play Money Games with children - Make believe games such as grocery store, restaurant and lemonade stand using fake money is a great way to teach children about money, giving change and not spending more than they have. Monopoly and other money games can teach children about spending and saving money as well. Plus, it can help them with deciding whether something is a good purchase or not.
Teach Kids Budget skills - Teaching kids budget skills is so important. I had mentioned how my mom used envelopes to budget spending when I was a child. I still use a modified version of this technique to this day. Using labeled envelopes is a great way to teach your child how to budget their money and save for certain things. For example, they could have envelopes labeled Savings, clothes, fun, new bike. That way they can split up their allowance into different envelopes so they know what they can spend and what needs to be saved.
Generic vs Name Brand - Most children want brand names. These are the brands that they see advertised on TV, in magazines and worn by the kids at school. But, many items can be bought non-brand name and be basically the same for a fraction of the cost. Teach your child to compare items to see what is the best purchase for their buck. I’m not saying to not buy any brand name. But, maybe buy a brand name shirt and non-brand name jean to save money.
Cash, Check and Credit Cards - Explain the differences of Cash, Check and Credit Cards to your child. Explain when it is the best time to use each for a purchase and why. For example,
Cash - When you have cash on hand. With cash there is never interest. The transaction is already paid for and done.
Check - When sending payments through the mail.
Credit Cards - When you don’t want to carry large sums of cash. Also, credit cards are used when traveling. Most hotels, airlines and rent-a-cars require a credit card. But, remind child that with each credit card purchase there will be considerable interest charged if not paid off within 30 days.Grocery Shopping with Child - Take your child grocery shopping with you so the child can see how much money is spent a week on groceries. Have them cut-out/carry the coupons so they can see that every penny saved DOES count. Make sure to show the child the receipt so they can take a look at the amount spent and the amount saved with those coupons. It gives your child an idea for the future on how you can’t spend your entire paycheck on the fun things because groceries and other household bills will be a huge percentage of it.
How to weigh pro’s and con’s - Teach your child how to weigh the pro’s and con’s before any purchase. This is a skill that your child will use for years to come for so many things. On a sheet of paper write Pro’s on one side and Con’s on the other. List the reasons to purchase under Pro’s and reasons not to purchase under Con’s. Which side has more? The side with the most is probably the best decision.
Helping the Less Fortunate - This is sometimes the best way to teach your children the value of a dollar. Plus, it is also a wonderful way to show your children the importance of helping others. Teach your child to give items and time back to families and children who are less fortunate. They can give them the toys they no longer use before they purchase new ones. And, they can give outgrown clothes before purchasing new ones. Helping others less fortunate will help reinforce the value of the dollar.
Clever Methods Parents have used for Teaching Children Value of a Dollar
Sometimes thinking outside the box is the way to go. Check out some of these methods that parents have used to teach their children the value of a dollar.
Soda or Water at a Restaurant - One mom while taking her family out to eat tried this interesting method to get her young boys thinking about the value of a dollar. Normally, when she and her husband take their kids out to eat they all would get water to drink. Every once and a while for a treat she allowed her kids to get Sprite. But, on this particular outing she gave her kids a choice. They can have Sprite or they can have water and receive the $1.00 that the Sprite would have cost them. Two out of the three boys chose water and one boy chose to have Sprite. When they got home the two boys each got the $1.00 while the third didn’t. Amazingly enough, the boy who didn’t get the $1.00 wasn’t upset because he felt the Sprite was worth it. The next time they went they all chose water.
Match the Savings - Some parents match whatever their children put into their savings or into their piggy banks. This is a way to encourage their children to put their money into savings instead of spending it all.
Webkinz Method - For those of you who don’t already know Webkinz is a stuffed animal that comes with access to a virtual world online where you can buy housing, toys, clothes and other things for your virtual animal. You can earn money many different ways such as working and playing games. You can only spend what you have so it is an opportunity to teach your children money management and earning money through hard work. But, as CleverDude points out it is missing something - banks, investing and home bills. If Webkinz had these things it would be a great way to teach your children not only earning & spending, but also paying for necessities and saving for the future.
Chore Charts - For one mother whose son would throw a temper tantrum when he couldn’t get a toy he wanted at the store, she started the chore chart method. Each chart had weekly chores. With each chore chart completed for the week the little boy could go to the toy store and get a $3.00 toy car he wanted. Once when going to the toy store to get his $3.00 toy car he saw a toy car that was $15.00 that he wanted, but his mom said he couldn’t afford it. He immediately asked how many chore charts that would be. When she told him 5 he had no complaints just determination to complete 5 chore charts. Within 5 weeks he was back at the toy store to purchase that car. He learned how putting away his money he could purchase something he really wanted….well worth all the work.
Four Quarters Kids Budget Game - A frugal dad teaches his daughter the value of a dollar by using 4 quarters. One quarter representing taxes, the 2nd quarter representing Housing, the 3rd quarter representing Transportation, and the 4th quarter representing Savings, Spending, and Giving.
Teaching Budget while shopping for kids clothing - One mother used shopping for clothing to teach budget to her child. As kids get older they love shopping for designer clothes and feel resentful when they can’t have things they “want”. But, since clothing is also a “need” shopping for clothing is the perfect time to teach budgeting skills to your child. See how this mother used kids shopping to teach budgeting skills to her child.
So as you can see there are many ways to teach your child the value of a dollar. Make sure to start early on to teach your kids money management skills and the chances that they will carry on these skills into their adult years are much more likely.
Addition Money Management Sources:
Photo above by theritters
