A reader wrote to say she had come up with a creative way to teach her 5- and 6-year-old how much things costs. She gave them a fake dollar each time they were good and created a store at home where her children could use the fake dollars to buy toys. But the kids became so money hungry that they started to hunt for real money all over the house and take it for themselves. Frustrated, she dropped the idea and asked for help. That reader had the first step right: She was teaching her children that money has value. But teaching kids about the value of money isn’t enough. She needed to teach her kids that you can do more with money than simply buy things. They also can save, donate and invest it. By giving her children more than one option for how to use the fake dollars they accumulated, she would be teaching them how to take personal responsibility for the choices they have for money.

To help kids see the value of money can be measured by something other than the number of toys it will buy, ask them to deposit money into a savings bank at home (it can be a fancy piggy bank or a simple jar with a lid). Then help them open and transfer that money to a savings account at a real bank. Ask whether your bank offers a junior savers account. These kids’ accounts allow smaller deposits and sometimes pay higher interest rates.

Once you set up an account, commit to taking your child to the bank at least once a month to make deposits. After a few months, point out how the account has grown. Explain that growth is called interest, which is extra money the bank pays you for keeping your money in their bank. Demonstrate this growth by taking the change out of your own pocket and laying on the table the amount of interest your child has earned. This visual aid helps your child see the interest as real money.

Consider offering to match their savings to help their savings grow faster. Your child will begin to understand that money deposited in a savings account will make more money and that taking personal responsibility for making that deposit pays off in the interest they receive.

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Susan Beacham
Written by Susan Beacham
Susan Beacham founded Money Savvy Generation in 1999 after almost two decades in private banking and investment management complemented by considerable time teaching at the elementary level.

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