How to teach your children the value of money

Many adults find it hard to manage money: we spend too much, we don’t know how to save: it just slips through our fingers! These problems arise because we haven’t really had a good financial education at home. That is why it is highly recommended that you start teaching your children the real value of money from an early age.

Financial education begins at home

An adult who has a good relationship with money knows how to manage it. Aspects such as saving, planning, retirement, or the proper use of financial products or the selection of credits never get out of hands.

But that healthy view of money begins at home, continues in schools, and keeps on through every aspect of life into adulthood. Because, whether we like it or not, we use money for everything, but we have to put it in perspective, explain exactly what it is, where it comes from and what it is for to our children.

The Spanish writer Laura Mascaró, mother of two children and financial adviser, explains that in today’s societies there are two extremist views of teaching the concept of money to children.

“There are two trends about the value of money, but both of them are wrong. The first one says that money is not important. But we send a contradictory idea to children because we go to work every day to get it and we need it”.

“The other trend is to recognize that money is indeed important, but it is difficult to obtain, difficult to manage, frankly suffered, that wealth is given only to a few, it is poorly distributed and that it will be difficult for us to have access to it”.

The writer assures both visions are wrong, “For me, both are wrong. The issue is not the value of money, but the value of the things we exchange for money”.

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Where does the money come from?

Before we teach our children concepts such as saving or planning, we must begin by explaining the very concept of money and where it comes from.  

“In my workshops, the first thing I do is to ask parents what they think money is, what the value of money is and how they would explain it to their children. Suddenly, they realize that they do not know what it is, but they also realize that it is a poorly posed question. Money has no value in itself, rather it serves us adults to reflect the value we give to things”, explains the author.

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The history of money

Children have a clearer concept of money when we tell them the story behind it. People started using money many, many years ago, in ancient cultures, as a form of payment. Precious metals and seeds were first used.

In Mexico, the cocoa bean was money! Even somewhere in Europe, salt was money.

“You have to explain the history of money, where it comes from, why grown-ups can go to buy things with a certain bill and not with the ones used to play Monopoly”.

“Money is not a thing. Salt at some point in history was used as money. However, the salt in my kitchen is not money”, adds the expert.

The assignment of a monetary value to an object that would be insignificant, such as a coin or a bill, arose when people developed the psychological capacity to place trust in other people and in an authority that oversees that exchange. That’s when the money really came.

Money has no value, things are what have a price

The value of money and the price of things is different. Value is subjective, price is a number. “Another key concept that children have to learn is the concept of the value of things that we get with money.

The first thing we adults should stop doing is stop asking how much it’s worth. Instead you have to say how much it costs.

When we say how much it costs, we are asking about the monetary price that I am going to be asked to pay if I want something. The value of money is something you give to it, how important you think money is. That’s different”.

Teach your children to have their own money

The final step in laying the foundation for a good money education is to teach and encourage children to have their own money. Trust them and respect their decisions!

“I am in favor of parents who give an allowance to their children to practice having their own money”, says the financial coach. Obviously it should have some conditions. It must be very clear why they are given that money and what they can do with it.

A key part is that the child knows that this money is his, and that means that he decides what to do with it. We can give him ideas, we can give him suggestions, he can ask us or not, but ultimately he decides.

When children have their own money, they know the concept of property and respect for property; they can only learn it if they have their own things.

If you are not free to use your own money, you are creating an interference with your relationship with your finances.

“If parents intervene, the child is no longer getting the information from himself, personal decisions are not made from his own knowledge but are conditioned by what he believes is what you consider to be correct or best.

You’d better not give him an allowance if later you will tell him what to do with it. If you give him money, let it be a kind of training so that he knows what to do in the future”, says the financial advisor.

Once you have these bases, you can think about teaching your children other concepts such as saving, but as grandmothers use to say, let’s start at the beginning.

Translated by: Ligia M. Oliver Manrique de Lara

Spanish version: Here

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