5 Most Creative Ideas to Teach Children About Money

Money makes the world go 'round and it's essential that children learn to understand how it works from a young age. Use creative methods to teach children about money so that they actually grasp the concept and are able to use it in their everyday lives. Bringing your children into a discussion about family finances or their own finances is a good way to make them feel mature about money and learn how it works. For younger children, use games and contests to help them learn about money.

One of the more creative and fun ways to teach children about money is to give them a small amount, around $5, and let them loose in a store with it. Before sending them off, though, give them a list of items to buy. Ask them to get as many of the items or multiples of the items using no more than the $5 you've given them.  This contest teaches children to compare prices when shopping and allows them to see that a certain amount of money can purchase more of one item than another. In addition to teaching children basic money and budgeting skills, it also encourages them to do basic arithmetic in their heads.

Divide Up Allowances
 

Whether you give your children allowance or money for completing chores, teach your children to save by having them divide up the amount they get each week. Encourage them to put between one quarter and one half of their allowance into a savings bank each week, between one quarter and a third of their allowance in a bank for charity or church, and the rest they can spend however they like. You may want to give your child three physical piggy banks or open a bank account for her savings and let her keep the rest in a change purse. Every so often, let her count the amount in the savings piggy bank, so that she can see that money builds up quickly when you save it.

Let Them Plan
 

Teach your child to budget by letting him plan an event or vacation. You can also let him plan his wardrobe purchases for the year. Give him a set amount of money and a list of items he needs to purchase, whether it's clothing, a hotel stay or tickets to an event. Stress the idea that he needs to get everything on the list without spending more than the allowed amount. Older children will have a lot of fun planning and will some responsibility.

Sell Stuff
 

Having your children sell old clothing or toys teaches them about retail and trading. It also lets them see that some items don't hold their value, such as a once expensive video game for a now out-of-date system. Having your child sell old items can teach him to make wiser spending decisions.

Give Them Loans
 

Teach your children about credit early in life by giving them loans that they need to pay back, with interest. If you give your child a loan, review the amount she has in savings and the amount she earns each week, just as a real lender would. Set up repayment terms and explain to her how interest works and what will happen if she doesn't repay the loan.