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It’s common knowledge that children as young as three years old can already understand the concept of saving and spending, with various studies concluding that kids’ money habits are formed by age seven. Teaching your children to understand money from an early age will give them the tools to survive and thrive in this day and age.

There is a story about the musician Sting. In his autobiography, he wrote that one of his early memories was of the queen of England visiting his small shipbuilding town of mostly poor to middle-class people. He recalled catching a smile from Queen Elizabeth II as she rolled by in a motorcade of beautiful rolls Royces, and thinking to himself that he wanted to be where she was; that he wanted more than a life as a shipbuilder in his hometown. "I knew I wanted comfort, I wanted security, I wanted privilege and money. I didn’t know how I’d get there, just that’s what I wanted," he said.

You might say, “ok, but most of us are not international rock stars with unlimited amounts of money.” But that is not the point. The point here is to recognize that even young children have ideas, aspirations, and dreams, but not always the knowledge of how to get there. It’s our job and role as parents to help guide them to move towards the dreams they have for themselves, and an important part of this is to develop an understanding of how the world of money and finances works.

Children already understand that money comes from work. During their formative years, you have to introduce them to the concept of work for financial value by teaching them how to earn their allowances through household chores.
Correlate trading work for income to your own job by explaining that you get paid for creating goods or providing services for others and that it’s all about earning for your upkeep in the real world.
Once they become teenagers, help them find a job during their free time. This would develop in them a love for work and make them appreciate the financial value of hard work.

So let’s look at this from the point of what the challenge is - that is, there really isn’t any formal education system in place for young people to learn about money. Often this learning happens by osmosis, without a real solid foundation for what’s right and wrong, and can result in our children going out into the world less prepared.

The idea is to discuss how we can counteract this hodgepodge way of teaching -- or not teaching, might be a better description -- our children about money and finances. What can we educate them about to better prepare them for life as adults, financially speaking? Life can be hard enough as it is, so why should we make it more difficult for our kids by letting them slide into adulthood ill-prepared?
And what happens after that? How do we move from the conceptual ideas about money to the literal implementation of money as a tangible thing?

Once kids grasp the concept of money through work, they should develop an understanding of saving and spending wisely, because that’s essentially what we do with money:
1. Teach them that hard-earned money should be handled with respect and spent wisely.
2. Familiarize them with the concept of budgeting.
3. Acquaint them with the concept of “needs” vs. “wants”.
4. Be a good example of spending - they often follow parents' example.
5. Teach them the concept of debit and credit, and how to be responsible for it.
6. For saving, piggy banks are great to help them understand the long-term rewards of patience when saving money.
7. As teens, give them the responsibility of maintaining a bank account, to help them with money management skills.
8. Teach them how to set goals, short-term or long-term, and assist them in developing a plan to achieve their goals within a reasonable timeframe.
9. Lastly, impress upon them the importance of giving. Introduce them to the concept of generosity and the joys of giving to charity at an early age. It has a pleasing effect on the brain and will make their lives both rewarding and meaningful. Let them choose a favorite charitable organization and allow them to give their time and a portion of their money to help the less fortunate. Let them be willing to be volunteers and donors. Impress upon them a perspective that there are many things other than money and material wealth that are invaluable, like love for our fellow mankind.

These are all wonderful principles and strong guiding concepts that will give our kids the foundation and skills to be successful with money and finances as they mature. This can increase their confidence and happiness as they get older and take control of their own finances. And the knowledge that your kids are happy and successful will make you feel confident and accomplished as a parent.
There is a quote that I’m sure you’ve all heard: “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” This very succinctly goes to the heart of what we’re discussing when we talk about educating our children about money.