Teaching your toddler the value of money can be a challenge, but you can do it.
"Lookie!" your 2 year old cries, pointing to a commercial for a light-up pillow that's popped up while she's watching her favorite cartoon. "We need to buy dat," she reinforces. Later on that week, you're at a department store and your little spender spots an aisle of baby dolls and their essential gear. "Mama, look! I need dat baby doll. I neeeeeed dat, Mama!" Parents of young children are often inundated with requests for "stuff." Partially, it's because toddlers don't quite understand what money is, let alone its value. If they do understand that money is required to buy the stuff they want, they don't quite understand why mom can't just dig out that little plastic card and buy more, more, more. Teaching toddlers to understand the value of money is probably one of the more challenging aspects of raising a child -- What are the first lessons you should teach? And when should you start? According to Anton Simunovic, a finance expert and founder of threejars.com, a kid's money management website, the best age to start teaching children about money is when they're old enough to start asking for things -- typically around age 2 or 3.
1Buy him a few piggy banks -- preferably clear ones. "A FEW piggy banks?" you ask. "Who am I raising, King Midas?" Not quite. Experts like Susan Beacham, CEO of Money Savvy Generation, a company that helps parents teach children about money, said that if a toddler can't see the money in his piggy bank, he may not understand it's in there. And simply saving money isn't enough -- which is why she sells piggy banks that feature four slots -- save, spend, invest and donate. An alternative would be to buy a few smaller, clear piggy banks, or even use clear jars or plastic containers. You can start with just two -- spend and save, or, if your family values charity donations, create a third jar for donations. The storage mode isn't what matters; what does matter is that your toddler can see the coins piling up inside, and that he has access to the "spend" bank.
2Use cash. Young children learn visually and concretely, meaning that they won't understand the connection between your debit or credit card and your bank account. If you want to start teaching your toddler about money, put away the plastic and break out the cold, hard cash. Start by modeling the use of money on small shopping trips. For instance, if you need to buy a gallon of milk, take your tot with you. Tell him, "Okay, we need to pay the cashier for the milk," and let him see you actually handing over the money. If there is any change left, you could even give it to him to put in his piggy bank at home. Or, you can pocket it and treat yourself to a mocha latte. Totally up to you.
3Start with a small allowance. As soon as your children are able to start helping to clean up their rooms or pick up their clothes, consider giving them a small allowance. For instance, if your 2 year old puts all of his toys away at the end of the day, give him a quarter or two. Help him decide whether the allowance should go in the spend, save or donate bank. Once he's saved up a little chunk of change, let him take the loot to the store and pick out a trinket or small toy.
4Manage gifts. For the first few years of his life, your toddler may receive hundreds or even thousands of dollars in monetary gifts. While you might be tempted to spend all of the money on your little one right away -- don't. If he's old enough to realize what he's getting, give him a small amount to spend and stow away the rest in a savings account or college fund. If you start teaching him the value of money as a toddler, he'll hopefully be less likely to blow through the $100 Grandma gave him for his birthday on a pair of concert tickets -- and maybe, just maybe, he may actually decide to start saving it on his own.
- Always supervise your toddler when he is playing with coins. The last thing you want is to have to take a trip to the ER because your tot swallowed Abraham Lincoln's head.
Things You'll Need
- Piggy banks or small jars