Parents' Guide to Teaching Children the Value of Money (2024)

Picture this: A young child excitedly clutches a handful of coins, eager to purchase a toy they've been eyeing for weeks. Their beaming smile reflects the joy of newfound financial independence. In this situation, parents like yourself have a pivotal role in shaping children's financial understanding from an early age.

Instilling the value of money in kids not only empowers them with essential life skills but also lays the foundation for a secure financial future. If you want your kids to have good financial habits growing up, you must equip them with the knowledge and tools to thrive in the future.

Reinforcing the value of money for kids may be difficult at first because they may not find the need for it at their age. However, the younger you start them in finance, the better they can navigate the real world once they mature. Here are some tips to help you get started.

1. Start early
   The foundation of financial literacy begins at an early age. Before your kids can comprehend complex financial concepts, you can introduce them to the basic idea of money.

   For example, use simple language and visual aids like play money to explain how coins and bills represent different values. During playtime, make them pretend to be a cashier or customer selling or paying for their toys. Alternatively, you can play board games like Monopoly to reinforce these ideas in a fun, relatable way.

   You can also engage in age-appropriate discussions about saving and spending to lay the groundwork for more in-depth conversations as they grow up. It can be as simple as teaching your kids how to buy a product at the mall or encouraging them to save the money they receive from relatives during holidays or birthdays.

2. Give them an allowance
   An allowance is an effective tool for teaching kids about money management.

   Instead of handing out money without strings attached, consider linking the allowance to age-appropriate chores or tasks to help them understand the relationship between work, effort, and earning money. For instance, give them a certain amount for cleaning their room or washing the dishes.

   Once you hand out the allowance, encourage them to save a portion of the money, set goals for spending, and even donate to a cause they care about. These experiences instill the value of budgeting and planning.

   Give them a clear money jar as a substitute for the typical plastic piggy bank. This way, they can see how much they've already saved, giving them a sense of accomplishment as the jar fills up.

3. Involve them in financial decisions
   Let your kids be part of certain household financial decisions, such as planning a budget for a family vacation or choosing between different purchase options. For instance, bring them to the grocery store or market to show how you compare product prices based on the family budget and encourage them to do the same.

   These types of involvement can give them a sense of responsibility, help them understand the real-life implications of financial choices, and discourage them from building bad money habits. These exercises also nurture their critical thinking skills and financial autonomy.

4. Establish what wants and needs are
   Help your children discern between needs and wants. Explain that needs like food, medicine, clothing, and shelter are essential for survival and well-being, while wants like toys, video games, and sugary snacks are not necessarily crucial desires.

   However, make sure to specify the nuances between needs and wants.

   They may think potato chips are essential since they are "food." They may also ask you for expensive and trendy shoes because they are "clothes."

   When they fully understand the principle of needs and wants, they can better prioritize their spending and avoid impulsive purchases.

5. Lead by example
   Children often model their parents' behavior. As such, it helps to be transparent about your money-related choices and demonstrate responsible financial habits. Discuss your budgeting strategies, saving goals, and ways of handling money challenges.

   Likewise, they must know the importance of living within their means and making informed financial decisions. You could buy them high-quality but reasonably priced clothes than low-quality ones to instill the idea of choosing quality over quantity for the long term. However, if you can't afford the purchase, show them how to save for it.

   When they see responsible financial behavior, kids internalize these practices and develop a healthy relationship with money.

As a parent, teaching the value of money for kids offers many short- and long-term benefits. Below are specific ones you and your children may enjoy when collaborating on certain financial decisions.

1. Financial literacy
   Understanding the value of money equips children with essential financial literacy skills. They learn how money works, the concept of earning, saving, and spending, and the importance of budgeting.

   As they age, these foundational skills become the building blocks for a strong financial knowledge base. Financially literate children tend to navigate the complex financial world better and make informed decisions about their future finances.

2. Early development of responsible financial habits
   Introducing children to the value of money instills responsible financial habits early on. They learn the significance of setting financial goals, saving regularly, and making thoughtful spending choices.

   When you let them practice these habits early, they internalize responsible money management as a natural part of their lifestyle. This early development of good financial habits sets them on a path toward financial stability and success in adulthood.

3. Financial empowerment and independence
   Children who grasp the value of money gain a sense of empowerment and independence in managing their finances. As they learn to save and budget, they rely less on others for financial support. This independence fosters a sense of confidence and control over their financial destiny, preparing them to face future money challenges with resilience and adaptability.

Teaching finance to kids can help set them up for life. The earlier you teach them that they're a participant in the economy, the sooner they can become financially secure individuals. Take note of the tips above and your role in securing your children's future.

Then, consider getting a savings and life insurance plan from BPI AIA to protect yourself and your loved ones. For instance, our Aspire plan covers babies and seniors up to 65 years old, ensuring long-term financial protection.

Schedule a virtual appointment with our agent today to learn more.