I never want my 4-year-old son to go into debt like I did, so I'm teaching him 3 money-management lessons

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Despite having what I consider to be pretty awesome parents who taught me right from wrong, I still managed to get myself into debt. I’ve since come through and learned to be a better steward of my money by budgeting, investing, and saving, but I don’t want my 4-year-old son to make the same mistakes I did.My parents taught me financial concepts, but they were mostly related to accounting and business rather than personal money management (my mum was a bookkeeper and my dad ran his own business), so I didn’t know a lot about credit or saving. I don’t blame them for anything, though – money is still pretty taboo for most families. As a parent myself, I want to give my son the confidence to be able to manage his money well. Even though he’s only 4 years old, I’m still working on giving him a head start in learning about the concept of money and some simple money-management skills. Here’s what I’m doing.

1. Showing him that money is an exchange of value

Sometimes we forget that money, in the simplest terms, is a thing that we exchange for other goods and services. In other words, it’s a form of value that we exchange for other things of value. I realise that this concept is pretty hard for a 4 year old to grasp, but I’m starting him off on the right foot by making sure he sees me paying for items with cash or a credit card. I’ll make it a point to tell him we’re going to pay, or the “pay place” as he likes to call it. I point out things like the register, the cashier, and the PIN pad where I insert the card. When he was smaller, he would watch me stick my credit card into the PIN pad, but now he enjoys the act of paying. It’s actually pretty fun to watch him squeal when the buzzing noise comes on to let him know it’s OK to take the credit card out. The idea is for him to understand that you can’t just walk in and out of a store without exchanging money for the goods you’re taking home, and although it’s a simple lesson, it’s paving the way for the other money lessons I intend to teach him.

2. Showing him what opportunity cost means

To recap – “opportunity cost” is simply what you give up when choosing one thing over another. For example, if you decide to spend $US50 on dinner with your family, you give up the opportunity to add that $US50 to your vacation fund. My son has the attention span of a goldfish, so it’s not realistic for me to teach him about a consequence that could happen far into the future. Instead, when we go to the store, I offer him two options for certain items so he can understand what it means to make a choice. One of the best ways I’ve found is to start with food. If I know he needs more cereal, for example, I’ll have him choose between two different kinds and make it clear that whichever one he picks is the one he’ll have to eat until the box runs out; there have been occasions where he’ll pick a type of cereal only to realise he wanted the other kind.

It’s still a work in progress, but I plan on tackling more complicated tasks when he’s older. For now, having him making choices like these is a good start.

3. Playing with coins at home

I can’t teach my son money skills if I don’t teach him numbers. He’s able to understand simple addition, like 1+1, and I’m fine with that for now. But I’m also giving him coins to play with at home and showing him how to add them together (I’m using pennies to make it easy on him) so he sees what looks like a lot or a little bit of money.

We’ve started a routine where we occasionally buy drinks at a vending machine and count out coins together so he sees that the change we count at home is the same money we use to pay for drinks.

Also, now that he’s better at recognising numbers, we look at price tags in the store and I try to show him that the cash I have is what we’ll use to pay. Sometimes, I’ll take out a smaller bill and point to an item that costs more to see if he can recognise that we can’t purchase it.

All of these little actions might not seem like much, but I know that once he’s older, I can scaffold these skills into more complex ones. And when it comes time for him to save and budget his own money, he’ll have a solid foundation.

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