When your 7- or 8-year-old begs for a new gadget that “all her friends have,” it’s different from her preschool pleas for a toy. It’s less about immediate wants and more about comparing her belongings to those of peers. Along with this rise in awareness come increased reasoning and decision-making skills that can help your child understand what money means.
Start by helping your child to make the connection between work and money. Explain that income comes from your and/or your spouse’s efforts and is spent according to needs. Then, explain how you make decisions: “This bag is inexpensive, but it won’t hold what we need. It’s not worth it.” Teach your child to budget, too: You might tell him the allotment for weekly treats and let him choose within that.
Giving an allowance can foster financial responsibility. Give your child a bank with spots for spending, sharing, and saving. Have her split her allowance equally between them. Support your child as she decides how to use the funds. If you don’t give allowance, you might do the same with a family change jar. Teach your child to reflect on her choices. Ask her why she wants an item: To complete a set? To be like her friends? Identifying motivations will help her make smart decisions around spending.