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Children & Money: Good Habits Begin Early

I must admit that I can vividly recall a time when I graciously traded my younger sister five whole pennies for one quarter. In the process I absolutely convinced her what an amazing deal she was getting, because "everyone knows five is more than one." Glowing with pride over her newfound wealth, she shared the details of our exchange with our parents. My sister promptly received a lesson in value... and I had to return the quarter.

Teaching children to manage money is the gift of a lifetime

Money management skills are a valuable gift that will last children all their lives. Money, however, is an abstract concept for young children. They see adults using money all the time without really understanding what it represents. As Shel Silverstein's clever poem Smart illustrates, understanding comparative value can be a challenge!

Learning to identify, sort, and use money responsibly are concepts that children can begin to learn at an early age. After children have learned to count, teach them the names of coins which they can identify by size and color. Talk to them about the value associated with each coin and why the sizes are so different. Typically, coins of higher value are made of more precious metals. Use pennies to help make each amount tangible.

Once children have grasped the different denominations, play simple games with them. Activities like these are fun ways to reinforce money concepts and build math skills.

  • "How many ways can you make 25 cents?" Let children figure out different ways to combine different coins to make the designated amount. Varying the target amount makes it a whole new puzzle!
  • Try pricing different items in your pantry and around your home and let your children "buy" them with coins.
  • After some practice with value, allow your child to count out money for simple real-world needs, like feeding the parking meter.
  • Choose a store that is not too busy for your child's first independent purchase. Be available to help but wait for your child to ask before jumping in.

Save some. Share some. Spend some.

Whether their money is acquired through gifts, chores, allowances, or entrepreneurial activities (like a lemonade stand), there will never be a better time than now to teach children how to manage it responsibly. I love the "Save, Share, Spend" philosophy where children learn to budget their funds into these three categories. In the process, they incorporate strong financial practices and values in their everyday lives.

The multiple award-winning Moonjar® Three-Part Moneybox is a great way to get started. Children divide their "income" among the three boxes, learning how to save for a goal, establish a budget, and keep simple records with the passbook.

"A penny saved is a penny earned." —Benjamin Franklin

Save! Good habits start early in life. Saving can take on many forms for the young child. Children can save for a bike or a special game, or saving can be for something more long-term like a car or college. Discuss with your children the things that you save for. Explain that there are different ways to save. For example, money can be saved in a bank or other financial institution for longer-term goals. Most financial institutions offer savings accounts for children with no fees or minimums.

"Charity begins at home." —Sir Thomas Browne

Share! Choosing "share" recipients can be daunting. Brainstorm with your children about where they would like to share their money. Do they love animals? Perhaps they would like to sponsor a local animal shelter or pet rescue. Are they passionate about books? Perhaps they might donate to a bookmobile, library, or non-profit reading program. Are they into athletics? Perhaps their money could go to help fund an athletic camp scholarship.

"Whoever said money can't buy happiness simply didn't know where to go shopping." —Bo Derek

Spend! No discussion of money is complete without talking about spending. Saving for a major purchase and sharing with others are important values. Equally important is setting aside some money for life's simple pleasures, like an ice cream cone or going to a movie with a friend.

Paul Richard, from the National Center for Finance Education (NCFE) has this advice: "Allow young people to make spending decisions. Whether good or poor, they will learn from their spending choices. You can then initiate an open discussion of spending pros and cons before more spending takes place." (Read full article)

The simple Save - Share - Spend system brings managing their own money well within the reach of children. The more connected your children are to the process, the more inspired they will be to make saving and sharing an everyday part of their lives.

How to Start a Tradition of Giving

Family discussions about saving, spending, and sharing create a good opportunity to talk to your children about people who are less fortunate. Explain that some people lack the necessities of life: food, shelter, clothing, and clean water. When children understand that others are in need, they are often inspired to help. I was inspired by the book Christmas Jars by Jason Wright and decided to start a new giving tradition in my own household.

In Wright's story, money is collected in an ordinary jar by members of a family over a period of time, then given away anonymously to someone in need. I loved the concept!

My "Giving Jar" is a plain old canning jar which continues to serve as a constant reminder that giving, even a little, can make a difference. Nickels, pennies, quarters, dimes - all spare change over the last year went into the jar. By the end of the year the jar contained over $100 I could donate to a worthy cause! The change wasn't missed, the money made a difference to someone else, and my experience has inspired at least one other family to start their own jar.

You and your children can find plenty of ideas for sharing locally or even globally. Check your local phone book for a community-based volunteer center that can connect you with service agencies or non-profit organizations in your area. You can also use the internet to find a local, national, or global charity.

Online sources for charitable giving

  • Search for a local charity by zip code at JustGive.
  • Find charities by keyword (and check out their reputations, too) at CharityNavigator.
  • Older children will find fascinating opportunities for converting the smallest "share" portion into livestock for a needy family at Heifer Project.
  • In any case, do your homework before you or the children give. The Better Business Bureau hosts a very easy-to-navigate list of charity reviews (including pie charts showing where the money goes.) Many state governments publish similar online ratings and reviews for regional and local non-profits.

—Kristine (Krissy) Beoka, MA, has worked for Montessori Services for over 11 years. As the Merchandising Manager, she reviews and chooses items for their two catalogs and websites. She is a proud "auntie" and godmother to more than a dozen little ones and loves to play in her free time.

—Originally Published 2011

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