When you have kids it is important to teach them about money. Where it comes from (working for it), the value of it, and how to handle it. In this post, I’ll give a quick rundown on how to start talking to your children about money.

From an early age, a child will observe a parent making perhaps a hundred or more transactions a year. These all leave an impression, and some of the impressions are not accurate. You go to a store, you insert a plastic card into a machine, and you walk out with food, toys, or electronics. The impression is that you didn’t exchange anything for what you received, so it is important to teach children that money is exchanged for the things you buy, both products like groceries and services like haircuts and medical care. Money has a value that can be used to buy the things you need and some things you want. Explaining the difference between a need and a want is key, but that is part of a larger discussion for another time.

So money has value, but how do I know how much money it takes to buy something? Great question. Items in stores and services are listed with a price, and that price is generally considered to be what the item is worth. You may agree and decide to exchange money for it, or you may not agree that the value is fair and look somewhere else for the item you need, but the price is the rate of exchange that assigns value to something.

So you give the clerk money and in return get a product based on a price. But how did you get money in the first place? Ah, yes. Money comes from work. You can own a business and work for yourself or you can work for a company or business someone else owns, but the bottom line is that work earns money. Money comes from work, and the amount of money earned is determined by the amount of work and the societal value placed on the work performed. [I’ll pause here. My mother, wife, and children are all teachers. Teaching is one of the most important professions to any society. I find teacher pay to be less than adequate for the work they do and the service they perform for the children they teach, their families, and society as a whole. I can list other professions that I feel are over or under paid, but the reality is that there is a relationship between perceived value and pay. Don’t send me angry emails, I’m on your side.] As your child gets older, opening their eyes to how different careers are valued is important as is the lesson that they should do something they enjoy. The intersection of those circles can help their long-term financial and emotional health.

For now, I’ll get back to what a younger child might need to know about money. Raising our girls, we focused on the three things you can do with money. Spend it, save it, and give it. Everything else flows out of one of those three areas, so keeping it simple for younger children, say ages 3-6, is best. We actually had a bank with three chambers to teach the spend, save, give principle. When the girls earned money from doing chores, we would try to pay them in smaller amounts so they could break up the money. In the beginning, we divided it evenly just to make it easy, but as they grew older, more went into the spend, and less into the save and give to mirror what an adult would do. The spend money was more fluid and could go for games or fun things they wanted, the save money could be used for purchases that required them to build toward over time or take on a trip to buy souvenirs, and the give money could be given to our local church or a charity like the Red Cross for disaster relief. Letting our children handle money from and early age, make purchases at the counter, and deal with change were all part of giving them confidence and reinforcing the value of money.

In the future, I’ll do a further breakdown of different ways to help your children learn to handle money at different ages. This is just a quick encouragement to be intentional in teaching your children about money. Is it not the center of the universe, but it is a reality of adult life, so teach a child how to handle money is an important part of parenting to prepare them for their life ahead.

The principles you teach your children now will last a lifetime. Working with your children and helping them learn to handle money now will give them the confidence and tools they will need to be successful handling money in the future.