It is Never Too Soon to Teach Your Child about Money

Parents have a responsibility to help their children understand money. You can help your child develop good money skills that will last a lifetime through instruction and example. But first you will need to understand your own attitude about money so you will be sure to practice what you teach.

Ask yourself what things that cost money are most important to you. What financial goals do you have for yourself and your family this year, in five years and so on?

Take a minute to write down a list, and then prioritize each item. Listed below are some ideas to get you started. There is no right or wrong here. This exercise is just to help you grasp what money means to you so you can help your child understand your values.
• Home
• Household expenses
• Education
• Recreation, entertainment, travel
• Savings, investments
• Charitable contributions
• Other ___________________

When to Begin
You can start discussing money when your children are as young as three years old. The best time to teach a child anything is when he or she shows an interest. So be prepared to start talking about money when your child starts asking you to buy candy or toys.

Begin by showing how money is used as a trading tool. People trade money for items of value or for services. Show your child how money works by allowing your child to make his or her own purchase. Give the child the money for a toy or book. Let the child hand the money to the cashier. Talk about how the money bought the item after you leave the store.

Approach money lessons with openness and honesty. Give children clear and consistent information about money. Tell them why they can -- or cannot -- have certain items. If you must say no to a child's request to spend money, explain, "You have enough toy trucks for now." Or, if the request is for multiple items, say, "You have a choice to make. You must decide between this toy and that toy."

You can start explaining the bigger picture once your child understands the basic function of money. Show an older child how money is used to provide for the whole family.

Begin at the grocery store. Pick out two similar brands of a product -- a name-brand cereal versus a generic, for example. Permit the child to choose between them. Allow him or her to make another purchase with the money saved if he chooses the cheaper brand. Explain how the more expensive choice leaves less money for other purchases.

Source: MetLife for the U.S. Government