Every parent is an educator, along with most adults that children come in contact with.  Children are keenly observant and it is important that significant adults work with children to be sure that they understand what they see and hear.  One of the essential areas is financial issues.

Even pre-schoolers will notice the exchange of money for goods.  There are some basics that you can introduce at this point.

• What is money? Show the child coins as well as paper money. Explain the various denominations and how they differ. It can also help in learning to count and add.

• How to get money. This is where you correlate work and pay. Even young children can have chores and a corresponding allowance. However, paying an allowance when those tasks have not been completed, can give the wrong message.

• Purchase power. Guide your examples by the age and understanding of the child. Explain that one is not allowed to eat the food in the grocery cart until it has been paid for.

• Incorporate them in some decisions. At the supermarket you can explain that you have $2.00 allocated for fruit; does the child want to buy apples or pears with that money. For an older child, you can also explain that you can buy 10 apples or only 7 pears for the same amount. 

There may be times when you need to forego the use of credit or debit cards and use actual cash to pay for toys or a restaurant bill to offer a more tangible example.

Elementary through high-school aged children will give you the opportunity to introduce more complex concepts. 

• Earning power. Increased responsibilities at home can correlate to an increase in allowance. Some parents may be able to encourage their children to part-time jobs.

• Budgeting. This can be very difficult. You may be able to establish a bank account either through you at home or at a brick-and-mortar financial institution. This will probably involve the realization that you can’t always get what you want when you want it. Budgets may take some one-on-one time to write (or type) the expenses the child is expected to cover and how much each one will cost. It will probably also need periodic reinforcement depending on the age and comprehension of the child in question.

• Saving. This will tie into budgeting by allowing the child to understand the concept of accumulating enough money to get a future item. As the child matures, you can explain how adults save for major expenses, unexpected needs, and charitable contributions.

• Loans. This is advanced training. It should incorporate a signed agreement and a serious discussion of what happens with late or non-payments. 

Reasonable decision making is part of maturity and financial security should be part of that process. 

If you need help, check at your local bank or other financial institution.  There are also financial advisors and CPA firms that will offer seminars or tutorials that will help parents become good role models and children to better understand the basic concepts of finances.  Try Investor.gov to explain interest payments.  For younger children, inquire at your local library about story books that deal with money.

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- The Capex Team