Economy and Kids!

When to Begin

You can start discussing money when your children are quite small, even as young as three years old. The best time to teach children anything is when they express an interest. So, when a child begins asking you to buy candy or toys, be prepared to begin a discussion about money.

Start by demonstrating that money is used as a trading tool. People trade money for items of value and for services. Show your child how money works by allowing the child to make his or her own purchase. For example, give your child the required amount of money for a toy. Let the child hand the money to the cashier, and after you’ve left the store, talk about how the money bought the item. You might explain that the merchant had what your child wanted— the toy— and that your child had what the merchant wanted— money. You traded money for the toy and both your child and the merchant were happy. It was a fair trade.

Give children clear and consistent information about money, and approach money lessons with openness and honesty. Tell them why they can or cannot have certain items. When you say “no” to a young child’s request to spend money, you can explain, “Mommy and Daddy believe you have enough toy trucks for now.” Or, if the family has money available for a new toy, you could involve your child in the decision, at a level your child can understand: “Your toy chest is full. If you gave one of your old toys to a friend or charity, there would be enough room for a new truck.” If the request is for multiple items, you might say, “You have a choice to make— you must decide between this toy and that toy.”

Once a child understands the basic function of money, you can start explaining the bigger picture. Show an older child how money is used to provide for the whole family. Real-world lessons are better than talk. At the grocery store, pick out a generic and name brand of a product your child recognizes. Show your child how to compare them – the price as well as the contents. Allow your child to choose between them. If the child chooses the generic, allow him or her to make an additional purchase with the money saved. If the child chooses the name brand, explain how that choice leaves less money for other purchases.