My Ten Sense: 10 easy steps to teach a young child about money

My 8-year-old got a hard lesson in economics today to understand what many adults encounter on a regular basis.
He spent more than the paycheck he earned for the week. He made $5 from household chores, but he spent $7.48 to buy a mini Lego set from Toys R Us today.

As we were leaving the store, he barked, “I spent more than my paycheck”. I used it as a chance to teach him that many working adults accumulate monthly bills and expenses that are more than their paychecks, which is considered living above your means. But I told him the silver lining is that he used less than 10% of his savings to make the purchase.

Parents, we need to teach our children how to earn and manage money before they’re old enough to drive or work. If they’re old enough to tell you how much something costs, they can understand money management. I don’t agree with some proponents who say children shouldn’t receive an allowance based on chores. Actually, you should pay your kids an allowance based on chores. How else are they going to understand the concept of working for pay? How are they going to learn how to budget? How are they going to learn to plan for savings goals?

Teach your children while they’re young, so when they make money outside the home they won’t blow it on frivilous purchases and then come asking you for money to pay for their gas, going out, their rent, etc.

Read 10 step to teach your small children and grandchildren how to make and manage money on my financial advice blog, www.mytensense.com.