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Children need to develop a healthy understanding of the value of money.

We have to introduce children to money as early as we can and be active in giving them opportunities to learn how you get it, how to spend it and how to save it. That way they will grasp an understanding of the value of money.

Children of this generation have a unique opportunity to learn good financial habits early in life that will stand them in good stead in the future.

Teach good habits to understand the value of money

Linda Gibbon, an educational psychologist in Joburg, says: “A good first step is to teach children the difference between needs and wants, according to their level of understanding. It’s important for a child to recognise that they can’t get things on demand.”

Gibbon says learning to tolerate not getting what you want immediately is critical to learning to set goals and to work towards achieving them. For her, a child must learn that “needs”, such as food, a bed and schooling, are a right, whereas “wants”, such as toys, games and cellphones, ought to be  open to negotiation.

In our consumer-driven society we are at risk of placing too much emphasis on material objects. “More often than not, adults and children tend to base their self-worth on what they have rather than on who they are,” says Gibbon. It’s essential to help our children value other things such as being a good person, showing kindness and compassion towards others and respect.

Also read our five good money habits to instil in children.

Respect and share

The idea of respect is critical  when it comes to your child’s understanding of the value of money.

One of the problems parents face is teaching children to develop a respect for money. They need to understand that it doesn’t come from a machine in a bank or shopping mall, but from hard work. “Give your child tasks for which she will earn money, but also instil an understanding that some tasks don’t have a price tag. Children need to know there are things they must do that are based on what’s good for them and the family,” says Gibbon. “Don’t reward a child materially for managing their daily (chores).”

One of the ways in which we can teach children responsibility and the value of money is by sharing it with others. “Charity and sharing are values learnt within the family, at school, and within communities. Parents should persevere with the lessons even though sharing requires a degree of sacrifice, which little children struggle to understand,” says Gibbon.

“The best thing you can do is to help your child understand why we share and, most importantly, to act on your own words. If you are compassionate towards others, you will impart the lesson of charity and caring to your children.”

Don’t be guilt-tripped

A big no-no is using money to make your child feel guilty or threatening not to give or to take something away, to discipline them. If you use money in this way you will teach your child that money is a tool of praise or punishment. And the corollary is also true. Don’t allow your child to manipulate you into getting them what they want. The refrain: “I am the only one who does not have a… so you have to get me one”, is used to make you feel guilty.

Dos and don’ts around children and money

Talk about money openly

Explain how you earn the money that pays for groceries, toys and school fees. Convey to them how it’s far easier to spend money than to earn it. Answer their questions honestly.

Don’t give money on demand

If you do, it confuses wants and needs and doesn’t. Rather allow them to learn that once they have spent their pocket money or savings, they have to earn more.

Make it possible to earn money at home

This way they learn that work leads to reward. But be sure to keep a few tasks that must be done without any incentives.

Give your child tuck money

Be sensible about how much is needed and how much items cost. Tell children not to be fooled if someone asks for food in return for friendship, for instance.

Teach children to save

Give children a sensible amount of pocket money that’s related to your budget and to the child’s age. Provide a piggy bank or open a savings account for an older child. Most banks now offer safe, inexpensive accounts for under-16s. Offer guidance on how best to manage their money.

Explain the difference between cash and a bank card

Explain that using a card when your money is used up leads to debt, as owing the bank will cost more in the long run. Show them how to access to their accounts using the internet.

Avoid exposing children to family conflict around money

When parents are separated or divorced, they may disagree constantly about money issues. This may lead children to feel they are a financial burden. Negative feelings about money can lead to more serious problems.

Explain how saving and investing is important for the future

This applies to toys, books, holidays, education or eventual retirement.

More reading

Raising Money Smart Kids by Janet Bodnar (Kaplan Publishing)
Raising Wealthy Kids: Seven Steps For Creating The First Financially Responsible Generation by Melanie Jane Nicolas (Kids Wealth International Club)
The Child Who Finds Money – Bedtime Stories For Children by MassiMo (CreateSpace Independent Publishing Platform)
Little Kids Big Money: Tools for Teaching Kid Friendly Finance by Andrea Travillian (Smart Step)
What’s in the Yellow Envelope? by Leoni Webster and Annelie Sdralis (Money is Childsplay CC t/a Money4kids)

Give to receive

  • Teach children that the recipient of your donation also has dignity. Charities are not the dumping ground for things that are beyond repair. For example, through the Santa Shoebox Project, children can get personally involved with giving to underprivileged children throughout South Africa. Ask your children’s teachers to put collection tins in every classroom.
  • Relate sharing to the child’s experience and don’t use guilt to get your child to share with others.
  • Pick a worthwhile charity for the family to sponsor. Decide what each family member is able to contribute, whether time or money, and only involve children in age-appropriate tasks or commitments. A few well-known charities are Choc, St Luke’s Hospice and Childline.

Ruth Rehbock