5 Ways to Teach Kids the Value of a Dollar
If your kids are anything like mine, money is easy come, easy go. One of the things we’ve been working on is to develop an understanding of the value of a $1. That may seem like a no-brainer to us. But it is actually something they have to learn through experience. I’ve seen my kids routinely spend all their allowance or birthday money in some way that doesn’t make sense.
For example, they buy a Pokemon card off their friend for the $20 they just got as a gift simply because that’s how much money they had in their pocket. Not because it was actually worth $20 or even $1.
One of the first steps in becoming educated in money is to actually understand its value related to the real world. Understanding that value means having a grasp of 1) how much it buys and 2) how much effort or time is involved in getting more.
Here are 5 simple things you can do to help kids begin to see what the value of money really is:
- DON’T BUY IT FOR THEM! Make them use their own money for what they want. Kids see stuff they want everywhere you go. They’re always asking can they have this and can they have that. As parents we want to make them happy and there’s a temptation to give in and buy them stuff all the time. Don’t do it. This is not helping them in the long run. You’ll be doing them and you a big disservice. They need to begin to see that money doesn’t grow on trees and learn to prioritize what they want and need. If you always buy them everything they ask for, even little things, then they will only learn that mom and dad will always buy them stuff. Is that what you want when they are 30? Make things you buy for them a treat once in a while and you’ll find they will begin to appreciate it more too.
- 24 hour rule. This one is not always that easy but it is a good rule of thumb in general for everyone. When your child sees something they just have to have try to get them to think about it for 24 hours. Call this a cooling off period. Go home and think about it. See if you still want it as much the next day when it’s not right in front of you in the store and you’ve had a chance to think about what else you might use that money for. You’re trying to counter the impulse buying.
- Remind them of where/when they will get money next. Talk with them about how much they have now and when they might get money next. Maybe it’s their next allowance, birthday or whatever. Get them to identify with the most basic idea of a budget. Help them begin to realize that they will have only so much money to spend over a certain period of time. They need to make decisions to prioritize what they will spend it on (and hopefully put some away in savings).
- Talk to them about how much stuff costs that you do as a family. A good way for kids to begin to grasp how much things cost in the world is to point out for them what you pay. When you, for example, go out to dinner as a family or go to the movies tell them how much it costs. They can compare that with how much they have in their piggy bank or savings. It will help develop a sense of how much money is needed to do the day-to-day things they like to do. As they get older, you could show them how much you pay each month for the mortgage and utilities. This is all information that will begin to give them a picture of how things work, how much they cost and how much they will need to earn someday to pay for things they want to have or do.
- Set up a savings account for them at a bank. Help them start putting money into it regularly. Agree upon a certain amount they will save each time they get some money. 10% or 20% is a good place to start and it’s pretty easy to calculate. Show them the bank statements and how they earn interest each month on the money they have deposited. In addition, this gives them a good lesson about how banks work. This is one of those things that we as adults tend to forget. Kids don’t automatically know how banks work. Take them into the bank when you are setting up the accounts so they can see how it works. Have them go into the bank at least once to make a deposit so they understand how it works. I know, in this day and age many of us do these transactions online, but it’s a good lesson for them to see it in person first-hand. When I did this with my kids the teller at our bank remarked to me, “WOW! This is great, we don’t see parents bring their kids in to show them how it works very often!”