Your children probably know a lot more about money than you think, and what they know they probably learned by watching you shop or overhearing you discuss a neighbor’s new car or the house that’s for sale across the street.

But what exactly are you saying? And what should you be saying when teaching children about money to instill a good foundation about the value of money to your children?

Money Management for Kids

Children know that money matters. And although money is simply a way to express the value of something in a uniform, agreed-upon way, too often we get emotional about it. Instead, money itself becomes the object of interest instead of all the things we can do with it.

You may be good at managing your money, or you may wish you were better at it, but either way you probably want your children to have a basic understanding of money management so they can make good decisions now and throughout their lives.

Children and Money – What You Say Matters

It’s important to talk about money in the right way. Let’s say you take your 5-year-old child on a bus ride to the park. Your child asks you to buy an ice cream cone, but you realize you don’t have enough money for both the treat and the ride home. How do you answer your child? 

‘We don’t have enough money.’
OK, you’ve let your child know that money—or the lack of it–is a problem.

‘We can’t afford the ice cream cone.’
Better, because you at least acknowledge that there is a choice in how you spend money.

‘We can either have ice cream and walk back home or skip the ice cream and take the bus.’
The best answer, because now you are talking about what you can do with the money, and taking the focus off the money itself. Now it’s all about the choices to be made with what you have. Kids get that.

You can help your children become more comfortable with money by focusing on what it can help accomplish, not by making it an object of concern or talking about it in an angry, upset or scared manner.

More Strategies for Teaching Children About Money

Here’s a great way to put money in perspective: think of money the same way you would consider the value of time. It’s useless to get angry about not having enough time for everything you want to do. However, by focusing on and budgeting the time that you do have, you will be able to prioritize the things you really want to do. By applying the same idea to money, children can understand that money is something that can be managed to help them achieve goals. Time and money can be treated much the same way: something to be aware of and used wisely, not an object or problem.

Letting children make decisions is a good way to help them develop a sound concept of both time and money. You may already let your children make simple decisions by asking them if they want to wear a blue shirt or a red shirt. And it’s easy to extend that to time choices by letting them decide between going to see a movie or taking a walk. Allowing them to make choices about spending money is a simple and natural next step.

It’s important to help children understand that money serves two purposes—to obtain what we need and to get what we want. We need food, shelter, clothing and basic services to help us live. We want cars, electronics, vacations and other things and services that enhance our lives. It’s only after we pay for essential needs that we can use money to satisfy our wants. That’s a big distinction children need to understand early.

When teaching children about money, keep the emotion out, the choices open and the focus on what it can help accomplish. Help them understand that it’s never about the money itself but what they do with it that can bring happiness and fulfillment.

If you are interested in learning more about Online Trading Academy’s trader and investor education, register today for a free workshop.

FREE BONUS: Receive our Wall Street Insider Kit with lessons from expert investors and traders when you sign up for your free workshop.