kids ask for moneyHere’s a multiple choice question for parents. What do you say when your kids ask for money?

A.      Why do you need money?
B.      Do you think money grows on trees? (What our parents might have said.)
C.      You just want money so you can go spend it at the mall, right?
D.      Go ask your mother/father.
E.      All of the above

Like most parents, you are thinking that kids only want money so they can spend it. But if you dig deeper you can see that maybe there is an opportunity here for you to teach them how to manage money. Maybe they are ready to learn a new skill.

What if your kids asked:

A.      Can I learn to read?
B.      Can I learn to ride a bicycle?
C.      Can I learn to play basketball?

No doubt, your answers might have a different tone entirely. But in each case, isn’t your child asking you to help them learn a skill?

Money management is a skill

We may not think of money management as a skill but it is. When a young kid asks to learn other new skills parents provide lessons, equipment, encourage practice, and celebrate success. Developing a skill requires repetition, mistakes, more repetition, and more mistakes, all leading to eventual successes. 

Simply observing or listening to parents or teachers, Watching a baseball game does not make one a skilled baseball player. Likewise, knowing how to read music does not make a capable pianist. And seeing how to ride a bicycle doesn’t teach a kid to not fall over. 

Most likely, you are already encouraging your kid to read by buying books and reading to them. You are encouraging your child to ride a bicycle by getting them a tricycle, then a bike with training wheels. You encourage sports or music by signing them up for lessons and buying them the equipment they need.

So what can you do when your kid asks for money? Start by take a deep breath. Believe me when I tell you that helping your kids learn to manage money is a skill parents are best equipped to do.

Here’s what parents can do when teaching children money management. When it comes to money there is no better way to learn than by having money and hands-on practice managing money decisions.

Use real money

Today’s money is not only cash. Many transactions your kids see are don’t use cash at all. Using a system as described in The No-Cash Allowance helps kids learn the concepts of debit card spending, ATM transactions and electronic fund transfers. This is all very “grown-up” and exciting for kids.

Give real control

When it comes to money, kids learn more by being in total control of whatever their resources are. No matter how good a parent’s intentions are, kids do not learn when parents make decisions for them. Can your child learn to read, ride a bike, or play basketball if you just show or tell them what to do. Can they learn if you never let them try for themselves?

Assign real responsibility

A child’s first experience with spending is all about having fun. This is where parents can exert their influence and require the child to use part of his money for certain “child-expenses” like school supplies or some clothing. Kids can learn to adjust their spending to account for both fun and necessary expenses.

Allow mistakes to occur. Your child will not learn to read, ride a bicycle or play basketball without making mistakes. Likewise, your kids will not learn to make better money management decisions without making mistakes.

Mistakes lead to wisdom

Remind yourself that kid-size money mistakes are the best learning experiences, are relatively harmless and don’t show up on a credit report. Mistakes made as a child are the foundation for the wisdom they will need as adults. Mistakes made later can create long-term financial problems for your adult children.

If you set up a regular, consistent allowance system as explained in The No-Cash Allowance your kids won’t need to ask for money. Why? Because your kids will always know how much, when and why they will receive money.

Kids know that in Monopoly®, they can only get $200 for passing Go. With that money they go forward and make decisions. When kids manage their own money, parents are more helpful when they step back and let the kids flex their decision-making muscles.

When the decision turns out to be wrong, you can gently ask them how they liked the results. Remind them that everyone makes mistakes with money. The key is to learn something from the experience.

Encourage money management skills

When your kid asks for money start being proactive. Now is the time to help your children learn money management. Create an environment for them to learn by doing. What you do now will help them make better decisions later.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.