How to teach kids the value of dollars and cents

By Tara McCabe ·
Little boy empties dollars and cents out of a piggy bank onto a table.

When it comes to finances, there is one thing you simply cannot buy and that’s good money habits from an early age. Just like riding a bike or learning a second language, some things are just easier to pick up when you’re little. 

With this in mind, we’ve come up with handy tips from money mentor Graeme Holm to get you started. Holm says that while a savings account in their name can give your child a “financial head-start,” nothing can quite compare to teaching them how to manage their bank balance.

“The truth is your money will only go so far if it’s not accompanied by another equally important gift: good financial habits,” he says.

Holm’s top tips for instilling good money habits in your kids are:

1. Make sure they know the value of money

Holm says in an age where most financial transactions happen invisibly, “using bank cards, shopping online and internet banking, it is important to make sure children see money as a finite resource.”

To make sure your child understands that money doesn’t grow on trees, you could start by either giving them an allowance, or even better, coins in exchange for weekly chores. That way they’ll start to grasp the idea that money can only be gotten through hard work.

Once they have their money, the next thing to teach them is the difference between needs and wants. This could be as simple as showing them the difference between wanting access to the latest video game and needing to have a full dinner each evening. You could even make a deal with them to pay half the price of something they want and encourage them to save up the other half. This is where budgeting comes in.

2. Teach them how to budget

Now budgeting may seem like a heavy concept to introduce your little one to, especially while they’re still small enough to bag free fruit from Woolies. But it doesn’t have to be. You could start by helping them create a budget for that special something they want, making it clear that they will have to sacrifice sweets and other small treats to save up.

Or, if your child doesn’t have an allowance, you could do the household budget together. That way you can show them how long it might take to save for a discretionary item, such as that toy that they really would like.

3. Delayed gratification

These days everything is instant. Not only is breaking news a Google search away, but internet banking means access to our money is easier than it has ever been. In this age where credit services like Buy Now Pay Later are so easy to access, it is important to teach your child delayed gratification.

As Holm says, “Easy credit has conditioned us to impulse buy whatever we want, whenever we want it, and deal with the consequences later.” 

This is why teaching them to save up is so important. “Half the time they’ll probably realise they didn’t want it that much anyway. If they do go ahead with the purchase, it will be all the more satisfying for them knowing they earned it themselves,” Holm says.

4. The importance of saving

Last, but not least, Holm says making saving a priority is key. Make sure your child knows that putting money aside for a rainy day is important, no matter how little they can afford to spare. 

“Making saving a priority as soon as money comes in, instead of saving what’s left over, is the most powerful habit you can teach your children,” he says.

You can do this by making sure they have somewhere seperate to store their saved up dollars and cents. This could be in a good old fashioned piggy bank, or it could even be in a child’s savings account. Then, once they get a little older, Holm suggests that they could start saving for bigger purchases, such as their first car.

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Tara McCabe
Tara McCabe
Money writer

Tara McCabe writes across all areas of personal finance here at Mozo from banking through to insurance. Tara is expert at practical money tips, showing readers ways to live richer and be socially conscious while doing it. She earned a BA (Hons) in English Literature from Canterbury Christ Church University.