7 Tips for Helping Children Understand Financial Limits
Teaching children about financial limits from a young age is imperative for developing healthy money habits and attitudes. However, it can be challenging to communicate these lessons in an age-appropriate way. Below are some helpful tips for foster carers and parents looking to help children understand financial boundaries within the family.
Discuss Family Finances
Being open with children about family finances, within reason, helps demystify money and sets the stage for money conversations. For instance, foster carers fostering with agencies such as the Foster Care Associates could explain that they get a fostering allowance to help cover the child’s expenses. Breaking down budget categories like housing, food, transportation, and discretionary spending gives context. Emphasise the fact that finances are finite, so choices must be made. Listen to input, but be clear on final decisions.
Setting Realistic Expectations
Make wishes versus needs concrete with illustrations. A wish is a game console; a need is a winter coat. Explain how resources go toward needs first. Discuss saving for bigger wants and delayed gratification. Give choices between inexpensive items/experiences when possible. Praise thriftiness and contentment with what they have.
Involving Children in Shopping
Bring children grocery shopping and talk through how you compare prices and use coupons to stretch the budget. Have them help clip coupons at home. When shopping for the child, set a firm budget and let them make trade-offs on getting one higher-priced item versus a couple of lower-cost items. Start an age-appropriate allowance and help them plan weekly spending.
Using Roleplay
Roleplay money conversations and decision-making. For example, a parent explains they can only afford one extracurricular activity per season, and the child must pick between football and dance. Or two siblings decide how to split a gift card from the grandparents. Make scenarios increasingly complex as they get older.
Setting Savings Goals
Help children open bank accounts and visualise saving for short-term goals like toys or experiences and long-term goals like university. Use concrete comparisons, like saving £2 a week in a piggy bank to buy a £10 book in five weeks. Praise incremental progress and talk through how small amounts add up over time through compound interest.
Teach the Value of Money
Children need to learn that money represents effort and time. When you give an allowance, tie it to chores, so they connect working with earning money. Talk through how you earn money at your job to provide for the family. Have them set up a lemonade stand or do odd jobs to make some money. Let them spend earnings on wants so they learn money doesn’t grow on trees.
Involving Older Children in the Family Budget
Sit down together monthly to review the family budget. Explain your overall income versus expenses. Share the thinking behind certain trade-offs and savings priorities. Ask for input on relatively flexible categories like groceries and entertainment.
Explaining financial limitations does not have to be negative. It is an opportunity to set healthy money habits and bond as a family. Tailor conversations and activities to the child’s age level. Be transparent, open to input, firm yet fair, and consistent in messaging. With patience and creativity, foster carers and parents can raise financially wise children.
