Tips for Teaching Kids the value of a Dollar

Teaching children the facts about money can be a challenge. Financial experts advise beginning when they are very young, however, most toddlers have no concept of such abstract ideas as monetary purposes and values. If you gave a young child a bright, shiny penny, he might be even more delighted than if he received a dollar.

One of the best techniques for introducing money is to give your preschooler a piggy bank and let him to enjoy filling it up with coins. You might allow him to occasionally empty his coins onto the floor and count them. A word of caution: This is only appropriate when your child has grown past the age when he puts things into his mouth.

Once your child understands the correlation between money and acquiring things, you can move on to teaching the value of a dollar.

* Teach decisions

An example provided by on financial expert was to give the child a quarter and show him what he can buy from a vending machine with that quarter. Explain that in one machine he might get one item for his quarter, but in the neighboring machine he could get several pieces of candy for the same quarter. Let him decide.

By repeatedly allowing your child to make choices about how he will spend his money, you are conveying the idea that the decisions about how his money is spent is in his control. This valuable money lesson will service him well when he grows up and has to stretch his earned dollars.

* Teach limits

Children learn that money has its limits by the example you set. If your child is with you during a shopping session and witnesses you looking for bargains and choosing one item over another, measuring cost vs. quality, he might model your attitude and become a wise shopper. When he overhears you using expressions such as, “That is out of our price range,” he understands that there is no endless supply of money and it needs to be managed and budgeted.

* Teach need vs. want

When your child comes to you and says he “needs” a new item, when the one he already has is still useable, you are presented with an ideal teaching moment to help your child discern between ‘needs” and “wants.” Have a discussion about the difference between the two concepts. Stress the importance of “needs,” such as food, clothing and shelter. Point out that everything your child wants may not be truly needed and money should be budgeted to cover needs first and then wants, if there is discretionary money left over.

* Teach how to prioritize

Give your child an allowance appropriate to his age. In the beginning of this phase of his money lessons, help him to prioritize how he spends his allowance. Teach him that the first thing to do available money is to set aside a certain amount for savings. Talk about how that savings can accumulate over time and allow for purchasing a costly item he might want, or to cover an unexpected emergency.

If buying his lunch is included in the amount of his allowance, talk about how lunch is a “need,” and should be covered before spending what is left of his allowance on what he “wants.”

You might also want to introduce the concept of giving and sharing by suggesting your child give a small portion of his allowance to charity. Again, this is a lesson best learned through example.

It is a good idea not to tie your child’s allowance to chores, but to stress that doing chores is part of his responsibility as a family member. It is a good idea to pay your child contributions he makes to bettering family life above and beyond his normal chores. Thus he learns that the more he works, the more money he has, advancing his work ethic potential.

The overall lesson you want your child to retain is that money is for saving, sharing and spending – in that order.

When your child has matured into a productive adult, earning his own way, his attitudes toward money management that were ingrained in childhood will provide him the ability to live well, providing a comfortable lifestyle for himself and his family.

Source: As seen on NBC’s Today Show, “Today’s Consumer” segment, 8/13/10