Wise parents would want to teach their children about money, where it comes from, the usage and so on. This article is written with your child as the reader in mind. It is meant to be a guide on money and to be read by both the parent and child together. The parent’s job is to elaborate more on the ideas mentioned in this article. The purpose is to give your child an introduction and a general idea about the function of money.

How did money begin?

A long, long time ago, bartering or the exchange of things or goods was carried out, as money did not exist yet. People traded the things they possess for other things that they do not have. They traded animals like cows, pigs and sheep. Grains and salt were also common as were tea, tobacco, rubber, beads and animal furs.

photo credit: Jarosław Pocztarski

In addition, metal items made of copper, gold, silver, tin and lead were also popular in the form of pots, tools, weapon and jewelry. Eventually, metal was chosen to be the most convenient and the best choice to barter with and coins were produced. However, coins were too heavy in big quantity and paper money was introduced. Today, both coins and paper money are so commonplace all over the world.

photo credit: tao_zhyn

Why do people need money?

People use money for a lot of different reasons. Some of which are:
• To buy things that they want
• To buy things that they need
• To help fulfill or meet some of their dreams or goals. For example, to go on a trip or to learn something or to pick up a skill.
• To make it possible for them to assist other people. For example, by donating some of their money to an organization or to the church.

photo credit: Eleventh Earl of Mar

Where do you get the money?

Your parents may give you some money as an allowance or you may have earned that allowance by doing some chores or work around the house. On special occasions like your birthday, you may also receive money instead of a present. If you sell something to another person like toys or books, that person will normally pay you with money.

You will also get or make money if you provide your services. For example, by cutting the grass, by washing the car, by doing babysitting work, by giving tuition to a younger child, by doing housecleaning and by running errands. The money that you get from your allowance and from doing chores or providing services is called an “income”.

photo credit: jermudgeon

What do you do with the money?

You can decide to save the money, spend the money or give it away. Saving money for example, in a piggy bank is for the purpose of saving it for future use. You can ask your parents to open a savings account for you in a bank where it is much safer.

photo credit: ken +

You may also decide to give away or donate some of your money for a good cause. The money can also be spent, as you like. It is important to spend wisely so that you do not use up all of your money. Some money can be used to buy things that are really important (needs) and other things that are fun (wants).

A way of keeping track of your money is to make a list first of what you want to buy (expenses) and the money you have (income). This is called budgeting. Always remember to save part of your money and not to overspend. You will never run out of money if your income is always higher than your expenses. If you keep this up over time, your money will continue to grow more and may be useful to you in the future.

For more great ideas on money, refer to the Carnival of Investing Strategies.

photo credit: pfala

Parents nowadays still teach their children old money traditional values that their own parents taught them like ‘Save money today, so you will have some money for tomorrow’ or ‘Waste not, want not (don’t waste anything)’.

Today’s society

However, today’s society is known as a “throw-away” society where ‘Buy now and pay later’, are common-place. Instant gratification is also normal, why wait when you can get it now.

Our kids will certainly get confuse when we tell them one thing and they see otherwise. This is because children learn from what they see and hear. So in this situation, a parent has to make extra efforts to instill the correct money values in their children. As always, talking to your kids is an easy and direct way to start. Open and constant communication, one to one, is recommended for effectiveness.

Allowance

The introduction of an allowance can also be a good teaching method. This method allows the child to take responsibility on how to spend or use the money. The allowance can also be given for doing chores or responsibilities around the house. The amount given will differ in every family. Give only what you can afford to give.

Extra income

You can also let your child to earn extra income by doing extra work around the house, garden, farm or during special occasions. This is aside to the normal chores assigned in the beginning. This is called ‘extra income opportunity’ and it teaches your child the idea of working or doing something to earn money. It certainly gives them a better idea on why we need to go to work and earn an income to support the family.

Open communication

At the same time, don’t forget to talk to your children about spending their money wisely. Earning the money is one thing but how to spend the money is equally important. Cover topics like the commercial advertisements shown on TV, the problem with peer pressure, the reasons for saving, etc. Some children may come from wealthier background and can afford more expensive things whereas others may come from a frugal family and hence has less money to spend. Talk to your children about the idea of letting money grow or multiply for future use instead of spending all now. They can learn how to allocate the money for different purposes as well.

The parents play an important role and your children will learn from your parental guidance and example. If the parents show good money habits like saving, chances are the children will pick up the same habit. Therefore, eventually your children will grow up to have good money values picked up from their parents and from what they have learned.

Check out the Carnival of Everything Money for more great ideas.

At one time or another, a parent would have asked the question ‘When is a good time to start teaching the kids about money?’. Teaching your children on the value of money is an important area and there is no one answer that fits all. It is all up to the parents and each family unit is different. So, a method that works for one family will most probably would not work for another family.

A good place to start

Where do we start? As parents, we have gone through our childhood and grown up to be adults. Compared to our children, we have definitely learned more things, good and bad, what works and what does not work. This is a good way to start teaching your children about money, by sharing your own experiences.

You can start from when you were young, when you started schooling, the amount of pocket money you received back then and when you started to earn money by yourself. You can share your savings method, if you had one. Maybe you used a piggy bank and had a savings account to deposit all the gift money, extra allowances and extra pocket money you did not used. You can relate your difficult experiences, on how it was tough in the old days to accumulate money. I believe your children would love to hear your experiences and stories regarding money.

About my parents

I know I did. I loved to hear my mom’s own experiences when she was young. It was a tough life for her back then. Having a higher level of education was certainly a great advantage during her time if you had one. Unfortunately, my mom did not manage to even reach Primary One (Malaysia’s education system) due to financial constraints and general life hardship. My mom’s contribution to the family’s finance was by doing things she was able to do. She took up a job as a cook (a basic life skill), she washed other people’s laundry (another basic life skill) and she even took a job as an office cleaner.

My father managed to complete Primary Six and that was good enough to ensure an office job throughout his life. However, it was still a tough life and a struggle for both my parents to build a comfortable life for themselves and their family.

What I learned

What did I learned from my parents experience? I learned that for some people like my parents, money was not easy to come by. When they had money in hand, they tend to safe-guard it carefully. Generally, I prefer to lead a frugal life just like my parents did. I learned to appreciate money for what it is, as a means to a comfortable life. Money is not everything but to have money is better than to have none. Nowadays, it can afford you better education, better health-care, better living environment, etc.

Now that I have children of my own, I love to tell them stories about my own upbringing and my experience with money. Their grandmother still loves to tell her own stories about her life when she was young. I hope that my children do learn something from all these life stories but I am confident that they will as I did too.

Therefore, it is a good way for you to start as well. Your children can learn from your mistakes and continue to practice the methods that work for you. Who knows, they would want to past it on to their own children and grandchildren and so on.