With nearly 70% of college students today experiencing significant worry when it comes to finances, teaching your child effective strategies for money management at a young age can save them stress later in life. At each stage of your child’s growth and development, you can help build upon their understanding of money and how it works. Through creative game-play, activities and storytelling, you can help your child begin to grasp the role money plays in everyday life. As your child gets older, you can guide them in the practical, real-world application of understanding finances.
Introduce The Concept Of Money In Games Of Pretend
Through imaginative play, toddlers and preschool age children learn important social skills, gain a sense of autonomy and develop symbolic thought. Symbolic thought is the ability to represent reality through abstract objects, language and gestures. Children recall and recreate scenes they witness in everyday life, and begin to understand the different roles people play in the world. Your child may instinctively begin playing games like store or restaurant with you, with friends or with a sibling, in which a “product” or “service,” like a toy or an imaginary ice cream cone, is exchanged for play money. This represents your child’s earliest understanding that society operates on a system of exchange, and lays the groundwork for grasping currency and how it functions.
Give Your Child Some Financial Control
As your child gets older, they may begin to receive money in the form of gifts or an allowance. Giving your child a small amount of control over their newfound wealth will help them understand the value of money and how much things cost. When your child first begins to handle money on their own, it may still be difficult for them to grasp the connection between the number on the bill and what it affords them. Once your child has mastered the basics of addition and subtraction, they’ll be able to determine how much more they need to save to buy that bike they want, or how much money they’ll have left over after they purchase a chocolate bar. Keeping a piggy bank or savings jar gives your child a visual representation of how much they’ve earned. Even if your child doesn’t have tons of savings, opening their first bank account can be an exciting experience, giving them the chance to talk with a professional banker and learn how to fill out deposit and withdrawal slips. Your name will also be required to appear on the account if your child is a minor.
Teach Your Child To Budget
As your child reaches high school and then college, they’ll become responsible for taking care of their own basic needs like food, clothing, self-care products and eventually housing. Your child may get their first job and their first taste of financial independence. Take time to sit down with your child and write out a monthly budget to prevent debt and encourage savings. Teach your child how to use online banking, and stay vigilant about the flow of money in and out of their account. If your child is ready for a credit card or has taken out a student loan, make sure they factor those payments into their budget. Teach your child how to check and read their credit score, and strategize with them to help them avoid starting out their adult life with unmanageable debt.
Setting your child up for financial success begins in early childhood. Take time to talk to your child about financial planning for their future, and provide them with literature and online resources to help them stay informed. Help your child build money management skills in a way that is fun and accessible.