Kid 1: Let’s go eat at McDonalds!
Kid 2: Yeah! McDonalds!
Mom: No, I don’t have money for McDonalds today.
Kid 1: Well, just go to the AMT and get it.
At the ages of 4 and 6, my children don’t quite have the concept of where money comes from. Aside from the fact that they can’t spell ATM correctly, they think it is a magic money printing machine that we can access any time we want. Getting kids to understand money, where it comes from, and how to manage it is an ongoing process.
There are a multitude of methods for beginning to teach kids about money, and you should use the one that works best for your family. Some may give allowance, others may feel that children need to earn it. Either way, using real money gives children a sense of ownership and helps them begin to understand the difference between needs and wants. Showing them how to save for a particular toy or other item teaches budgeting, saving and self-control.
As children grow into teens, they may begin earning their own money from summer jobs. Whether they work at a grocery store or provide lawn mowing services, be sure to take time to explain some basic financial concepts to them such as:
· Filling out employment paperwork
· The information on their first W-2 form
· Saving for retirement in a 401(k) or other plan
· How to file a simple tax return
· Basic budgeting principles
Children are sponges for this kind of information. Teach good money habits early and they will stick for a lifetime.