Tips for teaching your child the value of money

The holidays are still weeks away, but already our mailboxes are being inundated with catalogs filled with what is “guaranteed” to be this year’s hottest toys. I have found that I either have to hide them or throw them away quickly, otherwise they give my children a serious case of the “I wants.” In our house, we have found ourselves repeating the old adage “Money doesn’t grow on trees” a lot recently. This makes sense to adults, but for young children, it can be confusing. Here are some tips for helping your children begin to understand the value of money.

It is never too early to start saving: It is easy to see how children can think money grows on trees because with the click of a mouse or entering a few numbers at an ATM, voila, you can have just about anything you want. Toddlers and preschoolers do not need to be bogged down with the stress of budgets and finances, but they can begin to understand money and saving. Our children have always found it a thrill to get a few pennies or even a quarter and put it in a piggy bank. This is a great way to promote saving even before they can truly understand the concept. For older children, selling lemonade or helping wash a car can be great ways to help them understand the importance of earning money to buy something they want.

“Wants” versus “needs”: This is a concept we have just started to tackle in our house. For most young children, if they see it they want it. As they get older, they are more aware of what others have and may want those things also. My husband and I try to use these as teachable moments to talk about how you cannot get whatever you want, and if you want it you have to earn it.

One of the best things we as parents can do is to help our children understand that what we truly need is often very different from what we want. Needs are things such as clothes, food and a place to live, while wants are things we may hope to get for a birthday, Christmas or special celebration. A simple way to reinforce this is at the grocery store. Parents can help set this example for their children by going to the store with a list and sticking to it – only buying things we need. Taking children to the store – any store – can be viewed as a mild form of torture, and whether it is a balloon, candy or a toy, children catch on early if a precedent is set that every time you go to a store you get something.

Share the wealth: It can be easy for children – and adults for that matter – to become wrapped up in what they want and do not have. The holidays are a good time, as a family, to take a step back and remember those less fortunate. In our family, we make a special trip to do holiday shopping and ask the children to pick out toys we can donate. They have a wonderful time picking out gifts for other children, and it is a simple way to begin to understand the old adage, “giving is better than receiving.”

There are also ways to do this year round. In our house, we try to instill that for every new toy, pair of shoes, or book we receive, we give one of those things we already own away to someone who needs them. We usually bring the children with us when we donate to a shelter so they can understand that not everyone is as fortunate.

For older children, as they start to earn money from chores or babysitting, parents can suggest they donate some of the money. I remember when I was growing up, my parents always asked my sisters and I to give a certain part of the money we made to a cause other than ourselves. This was a great way to learn that whether you have a lot of money or just a little, there is always someone who needs it more than you do.

I hope you find these tips helpful. Unfortunately, they are not the magic cure for a case of the “I wants,” but with luck they will make it a bit less frustrating. Money can be a source of stress and conflict but it can also be a great tool for learning important life lessons. Happy teaching!

Liz Farrell lives in San Francisco and is the mother of two young children. She was formerly a television producer in Washington, D.C. and San Francisco. E-mail: