Teaching Money Awareness

When out shopping a few months ago my 5 year old daughter asked for a toy she saw. I replied quickly without really thinking “We can’t afford it.” to which she replied,

“Just put it on your card Mama. “

This shocked me. Then I started to think about her response. She has seen me paying by debit or credit card many times, probably more often than with cash.

The concept of having money in the bank to pay for purchases with debit or credit was difficult to explain but I gave it a stab.

• So Mama and Papa get paid for working and then we deposit the money in the bank.
• Yeah
• And then we use that money to pay for all the things we need, a house, heating, food, clothes, gifts and other things
• But didn’t we already buy our house?
• Yes, but we had help from the bank
• How did they help you?
• It is called a mortgage but don’t worry about that now what we were talking about is how we could buy that toy but you don’t really need it now
• No, but I want it
• Yes but we have to buy the things we really need first like food
• But I really need that toy
• No, you don’t, it is something you would really like to have. You can put it on your Birthday or Christmas list
• When is my birthday?

You get the gist I am sure. Financial awareness is not an easy concept to teach a 5 year old so I took a step back and thought about allowance.

We had not discussed allowance and did not think we would be doing so for a number of years. I did not receive an allowance. I was expected to do chores and babysit siblings and was given money if going out with friends. From the age of 13 on, I could earn an extra pound or two by washing cars, babysitting for friends and then got a part time job at the age of 17.

Times have changed. Children have less access to physical money and often less understanding of how money changes hands and the implications.

I think using actual money will help Daisy to understand how to save for something she wants and consequently encourage her to save more.

We decided on $1 once a week and split it into:

• Saving – 50c
• Charity – 25c
• Fun – 25c

If Daisy mentions she wants something she is encouraged to put it on her wish list.

So far this system is working well. More tips on how we teach money awareness will follow.

How do you teach financial awareness to your children or students?