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Who doesn’t like to dream about large sums of money? Most people have daydreamed about what they might do if they suddenly had millions of dollars. Ask an adult, and they might mention paying off their mortgage, making investments, or traveling the world. Ask a child what they might do with one million dollars however, and you’ll end up with a pretty wide range of responses. Some kids might answer specifically, with something as common as candy or as rare as a mansion. It’s usually a fun conversation that can provide a bit of insight into just how much your kids understand the value of money. We recommend having conversations with your kids about money early and often, and when you do, remember three key points as you consider their responses — perspective, priorities, and practice.
Anyone’s answer to how they might spend $1 million certainly depends on their current budget and lifestyle. Your kids might still be grappling with how much $10 or $100 is actually worth. Ask them questions about how much they think things cost, starting with small items, and help them understand the value of a dollar. Over time, you can help your child relate other important concepts to the value of currency. Before you know it, they will be able to relate the concept of money to jobs, to careers, to paychecks, to earning power, and so on.
It’s crucial to have discussions with your children about money so they can understand how currency works and how important it is to save. Many kids can grasp the concept of prioritizing at a young age, even if they don’t use that word. They might explain that it’s a good idea to “spend money on important things, and save money for the extra stuff.” And in the simplest of terms, we agree that saving is a pretty good idea.
Teaching by example is very important. Allow your child to participate in your shopping routine. You can include them in the planning process by letting them help you make a list. You can include them in the budgeting process by sharing your decisions about purchasing some items, and choosing not to purchase others, as your budget allows. By including them in these activities, you’ll be showing them how to spend wisely.
With these key points — perspective, priorities, and practice — as a backdrop for healthy conversations with your kids, you can have some fun discussions about money, and perhaps gain a little bit of insight into just how much they understand its value.