It’s more than just counting coins.

People often talk about teaching kids “the value of a dollar” when it comes to educating them about finances. However, this phrase doesn’t quite capture the essence of the lesson. If you were to ask a child what the value of a dollar is, they might simply say “100 pennies.” This literal interpretation misses the bigger picture. Instead of focusing solely on the value of a dollar, it’s crucial to teach children about the use of money.

Let’s consider an example: You take your child to a toy store (if kids still enjoy those…) and they spot a doll they want. They ask for it, viewing it as a simple request, while you see it as a $20 expense. Rather than immediately purchasing the doll, explain to your child the cost of the toy and where that money comes from.

To reinforce this lesson, consider giving your child an allowance. When they desire a toy, have them use their own money to buy it. By doing so, they will learn firsthand that spending money reduces their funds. While occasional treats are okay, it’s vital for children to grasp that money used for purchases doesn’t magically appear.

The key concept here is the practical application of money—seeing that a dollar diminishes when acquiring something. Money is not an endless resource, and understanding this fact will encourage children to be more thoughtful in how they manage money, whether it’s their own or their parents’.