Younger children (under age 8) are just mastering basic ideas about money, from what value coins have to how much different things cost. You can help by talking to your child about what the coins in your wallet are worth and having her add and subtract them. Give her opportunities to make small purchases, too, so she can practice counting out the correct amount. When you're running errands, talk to your child about where your money comes from. Many little ones believe banks and ATMs just supply all the cash you need. Explain that you can only take out as much money as you've put in, and that banks hold your money to keep it safe.
Money is a very loaded and hard to discuss subject for most people, but it is important to create an open home atmosphere for questions and concerns about money matters. Just as you would want your child to feel comfortable asking you questions about school subjects or current events, he should also be able to ask you about money. Create that environment by not keeping money matters secret. Allow your child to see you pay bills and let him help by putting stamps on envelopes and mailing them. If you have a budget, sit down with him and explain how you divided up your income each month, and discuss what you do with any extra money.
When she has a good grasp on the value of coins and bills, and can add and subtract them accurately (usually in 1st or 2nd grade), consider giving your child an allowance. Discuss upfront what you expect her to buy with it (trinkets at the mall, instead of asking you to pay for them? her own lunch at school?). Help her set a savings goal and a means of achieving it. For example, if she wants a video game cartridge, talk about how long it will take her to save up the money to buy it if she saves half her allowance each week. How about two-thirds? She might want to use a see-through bank or glass jar to save her money so she can see her progress. She can even document it on a chart. This helps her learn delayed gratification, a key to good fiscal habits.
Older children become more aware of the world around them. They may be more concerned by news stories. They are also pay a great deal of attention to advertising and to their peers. They notice who has what and want to be just like everyone else. It's your job to keep the conversation flowing, reinforce your family's financial values and encourage saving and fiscal responsibility.
Make Allowances Work
Rather than settling on a figure such as $1 per year of your child's age, some experts recommend a needs-based allowance. Think about how much money you dole out to your child for candy at the supermarket, school lunches, field trip souvenirs, and the like. Decide which of these you'd like to be your child's responsibility, and then set the allowance accordingly. Be sure to allow some room for discretionary spending, for savings, and for donations to charity, if that's important to you. Once you've explained the system to your child, the key is to stick to it. Resist the appeals for "just a few dollars" to buy a new barrette or pack of stickers. Your child needs to use her allowance for these purchases. But you'll also need to bite your tongue when she buys something you consider frivolous. Remember, it's her money now and she needs to learn how to spend it appropriately.
At this age, your child can begin to understand more complex concepts such as compounding interest. He may be ready for a savings account at your local bank. Or, you can illustrate how this works by matching some of the funds he sets aside as savings from his allowance or any monetary gifts he receives. Small loans will also teach your child how lending works, but be careful — charge him interest so he doesn't see credit as the easy way out!
Keep Up With the News at School
Your child's math or social studies teacher may include money or economics as part of the curriculum, or money talk may be interwoven with peer gossip. Ask him or his teacher about what is being discussed at school. Invite your child to tell you what schoolmates think and feel about money. You may be surprised to find out how aware your child is about class and money, simply from noticing which kids have bigger allowances, the newest toys, or which ones wear hand-me-downs. Especially in junior high school, having the latest trendy clothes, gadgets, and birthday parties can be a really big deal. It's important to explain to your child what you think about "keeping up with the Joneses" and that friendships shouldn't be based on what clothes he wears, but on who he is as a person, inside.
Teach your child about saving money and budgeting while grocery shopping. Show him how to compare similar products and what, if any, differences there are between them. Have him clip coupons with you and gather household recycling items.
Watch the News With Your Child
The easiest way to know and monitor what your child is exposed to is to sit down together and watch the news. Find a program that isn't overly sensational (try local news and weekend shows) and talk about the reports concerning money. It doesn't have to be a formal talk about the economy — in fact, that will probably bore your child. Instead, just ask what she thinks about images and stories as they appear. Discussing the news together will also allow you to gauge her reactions and decide whether she seems overwhelmed, confused, disinterested, or if she wants to know more. If television news presents money matters in a way that's too advanced, confusing, or boring, try reading the newspaper together. Scan the business section for articles you think are interesting, and lead your child through them. It's also a great way to build reading skills and can be done anywhere, anytime.
Keep an Open Ear and Mind
Be open to listening and answering your child's concerns about money and the economy anytime. You may not be able to engage her in discussion or make her watch the news with you, but she may ask a question about homelessness while you're doing your shopping or are just driving around; a kid's mind doesn't always make the most linear connections. Inquire why she is worried and if it isn't a convenient time to talk right then, tell her that you want to talk more about it later. Set a time so you make sure you remember and your child understands that it's important to you to talk with her. Also respect her wishes if she doesn't want to talk at a certain time and revisit the discussion later.
Be ready to discuss money matters again, and often. Money will always be an important topic in your and your child's life. Take advantage of the opportunity to use the topic of money as a springboard into larger topics about class issues, stereotypes, tolerance, and budgeting.