SPENDING, INVESTING, AND GIVING SIMULTANEOUSLY
Learning about the concept of money should simultaneously include lessons on investing. I would suggest as early as 5. Children understand more than we give them credit for. Teach them early and often, because they won’t learn anything in the school systems about handling money wisely. Use the 5 laws of gold from the Richest Man in Babylon:
THE FIVE LAWS OF GOLD (Paraphrased)
1. Money will be plentiful for those who invest not less than one-tenth of their earnings.
2. Money works for the person who is smart enough to invest it wisely.
3. Money sticks around people who seek sound advice on how to invest it.
4. Money leaves people who invest unknowingly or trust people who have not proven themselves to be wise with money.
5. Money leaves people who take high risks with it.
If you haven’t read this book, go get it. It’s a simple read with simple concepts that have profound value for anyone who is open to the messages. Children are open to education, so start them out on the right foot financially with some lessons in investing. I would suggest reading books like The Richest Man in Babylon to them as early as 5. It’s written as a fable, and is perfect for teaching young children and adults alike.
MAKE IT REAL
Get 3 transparent piggy banks so they can save and see it easily. Explain that one is for spending, one is for saving, and one is for giving. Any money they receive, have THEM take a third of it and save it each.
They should have a goal for the spending bank, perhaps candy or small toys. This is their fun money for extra things they want to buy, and is a great learning tool when they start realizing the cost of things. They’ll run into instances where they have to prioritize what they want because they can’t have everything.
They should have a goal for which charity they want to give THEIR money to. If you belong to a church and want to instill the value of tithing to church, that’s what this money is for. They don’t become a giver when you hand them your money to give away. They become a giver when they give their own money away and feel great about doing it.
Lastly, there should be a goal for saving and investing. Try to find a mutual fund company in which the money can be invested in small amounts. If you can but a $5 chunk of a mutual fund with their money, and show them online what’s happening to their money, it’s a great learning experience. You will wrestle with them about wanting to pull that money out in order to buy a toy. There are tons of teachable moments here, regardless of how to you structure it. Teach them about the stock market, mutual funds, corporations, etc.
MAKE IT FUN
If a child is old enough to comprehend the concept of money and how it’s used as a medium of exchange for goods and services, they are old enough to grasp all of the concepts I’ve stated above as long as they are presented in a fun way. Be sure you make it real for them, and use things in their lives to help explain it. Play house only instead of cooking, be a mutual fund company and use play money to show them how this stuff works.