Once your children are able to grasp concepts, they’re ready to understand basic financial terms too.
Of course, you can’t use high school or college-level concepts when teaching young kids about money. Instead, you need to work with the concepts and logic they understand.
Becoming financially literate at an early age helps your children understand the value of money, the value of items, and monetary organization.
You can use the following methods to teach them budgeting concepts efficiently.
Take Them Whenever You Go Shopping
Your children already learned their early life concepts through their interactions with you. If you think about it, letting them watch how you use money and make purchases is the best way to teach them.
Whenever you’re about to buy groceries or go shopping for your children’s clothes or school supplies, take them with you. Allow them to observe as you compare prices and do mental calculations.
As they observe, your children will understand that you exchange the bills for the items. Soon enough, they will start asking how many bills you would need to purchase an item they like.
From here, you can introduce the concept of monetary value to children, which is the first step to learning about budgeting.
Ask Them to Pick and Check Out Items for You
Now that your children have grasped the idea of monetary value, allow them to assist you whenever you’re out shopping with them.
Tell them the amount of money you can spend. Then, ask them to pick out items from your list. Make sure the list includes the brand name and price of each item.
They’ll likely fail to stay within your budget, especially if they pick out the wrong items. Here, you can teach them why it’s important to stay within budget and how to decide on which items to buy.
Play a Game That Uses Currency (If They’re Old Enough)
If your children are old enough, such as in the third grade, you can explain budgeting to them by playing board games, card games, or even simulation games that use money.
If your children are having fun, they will learn the concepts of finance better. For example, figuring out how to buy property and outbid everyone to win a game of Monopoly is a great way to learn about budgeting and monetary value.
If your kids fail to win, you can teach them about prioritizing items.
In Monopoly, the priority is to raise property values to outdo every millionaire in the game. In real-life budgeting, you need to prioritize basic needs like food, shelter, and clothing before anything else. Introducing this concept while playing the game will make it easier for your kids to understand how it applies to real life.
Resource gathering and simulation mobile games help expand this concept further. Just make sure you are there to guide your children every step of the way.
Give Them Monthly (Not Daily) Allowances
Some parents choose to give their children daily allowances. However, to help them learn about finance, it helps to give them monthly allowances.
Most children in the fourth grade understand monetary value, prioritization, and spending. To improve their financial literacy, use consistent exercises that affect their daily lives.
A monthly allowance gives them the total amount they’re allowed to spend for that duration. This will help them recognize the value of spending prioritization, especially when they make mistakes during this learning process.
Trust me, they will fail many times in the early stages (and you’ll need to be there to help them out). However, with consistent learning, they will develop a better understanding of these concepts and become disciplined and organized in terms of budgeting and spending.
Involve Them in Household Budget Conversations
Aside from giving them the opportunity to budget for themselves, also welcome their ideas for the household budget.
Some parents might not like the idea, but involving children when budgeting for the household helps them form financial discipline. Additionally, it helps them work with others in creating and committing to the budget they helped formulate and set.
Now that your children fully understand the idea of budgeting, ask them about their opinions on the prioritized items on your budget list. If they disagree, ask them about their reasons and view their answers objectively.
This way, you help them continue to improve and develop their financial literacy and discipline.
When teaching your children about finance, use ideas and examples that they understand. Once they grasp the basic concepts, they will be able to apply them in real-life contexts.
Consistently enabling them to exercise their financial logic improves their discipline and organization, which will help them handle their money responsibly as they get older.
Leave a comment below to let us know which tip worked best for you and your family!