Learning the Value of Money

David Coleman's advice for teaching your children the value of money

I imagine that Christmas has been a much more economically thoughtful time for most of us. The days of excessive spending on borrowed money are over. Wouldn’t it be great if our children realised this too! Certainly in the free spending days of the Celtic Tiger our children seemed to know “the cost of everything and the value of nothing”.

So how can we manage our children’s expectations of rampant consumerism? In so many cases they are well used to getting what they want when they want it. So given that we now need to reign in our own spending let’s teach them to reign in their expectations too. 

Teaching children the value of money is best done by example. There is no doubt that if our children see us spending without thought and spending beyond our means they will simply continue to copy us. 

So, if you don’t already make a monthly budget then start. Work out your net income for the month and then list all of your anticipated expenses. Let your children sit with you and watch if they want.

When you go shopping let your children see you making a list of necessary purchases. Then stick to the list. Explain the difference between necessary and luxury purchases.

Credit and debit cards confuse the valuing of money. Our children will have no concept of how much money we are spending if they only witness card transactions. Returning to cash is important to give them a clear sense of the quantity of money involved in a particular purchase.

Children also need to be spending their own money if they are to get a true sense of its value. So I think it is a good idea to be giving them their own pocket money. If nothing else you can start to explain the cost of other items in terms of the number of weeks of your child’s pocket money!

I also think it is worth giving children the building blocks to future monetary health so always impart some advice along with the weekly cash. Perhaps the pocket money can come with the stipulation that they can and should “spend some, save some and give some to charity”.

Allowing them opportunities to earn extra money for extra help is also a good thing.

I’m not a fan of lending money to your child. If they don’t have the cash in their pocket let them lose out on the opportunity to buy. This will reinforce the idea of saving money for a future spending goal and also support the idea of not spending beyond their means.

You might also like to let children share some of the cost (a small percentage perhaps) of even necessary purchases like clothes, school books, presents for their friends at birthdays and so on. This too will remind them that everything has a cost and so correspondingly they might attribute greater value to the item.

Finally, don’t be worried about disappointing children because you can’t afford something. Part of the reason they can develop unrealistic expectations is because they have never experienced the disappointment of not getting.

Learning to cope with disappointment can be just the motivator required to encourage our children to work hard, save hard and then really enjoy the fruits of their labour