Helping a Child Understand Spending in 3 Ways

For the past few months I’ve been trying to teach my son how to save money and I truly believe that in today’s day and age, this is one of the most confusing tasks of a parent. 20 years ago if a parent told their child that they didn’t have money, a child could demand to see the inside of their wallet. If there was green stuff folded up, they were lying and if not, well, that meant no candy bars or toys this week. Unfortunately, that is not the case anymore.

Three times in the past 2 months my son has asked me for a new game and when I try to explain that I don’t have enough money for games he gets upset that I won’t just use my ‘green card’. For a child trying to learn the value of a dollar, these ‘green cards’ are extremely deceiving. My kids have seen me go grocery shopping, fill up my cart and bring everything home, all without handing over one dollar bill. In fact, with the self-checkout lanes, sometimes I don’t even talk to a cashier! So, after 3 frustrating conversations and 40 gray hairs later, my husband and I sat back and thought about how different things are in today’s world. Technology and convenience has changed the way people receive and spend money on a daily basis and helping kids understand the process is completely different than years ago.

Since our last trip to the store, my husband and I came up with an ‘Understanding Money’ three step program.

1. We’ve started using more cash when going to restaurants and stores. I give my son a certain dollar amount to buy his lunchbox treats and he has to decide what he wants to spend his money on without going over. This gives him some ownership and responsibility along with recognizing the value of a dollar.
2. We’re explaining how checking accounts and debit cards work so he can start to understand that using a debit card actually does take money out of our account.
3. Giving him a solid understanding credit cards too. Credit cards are different in that the money doesn’t come out of our checking account right away. We’re trying to help him understand the concept of buying something now, but paying for it later and explaining the benefits and drawbacks of purchasing things that way.

So far it seems to be working really well, however I can’t stop wondering how many steps I’m going to have to add to our current plan in 3 years when my daughter hits this age!