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Kids learn about importance money has in life by watching how the adults in their lives use money. Showing your child the many ways that money is used is the most constructive way to show them the value of the dollar.

Begin When They're Young

Start showing your child at a young age how money works. It's imperative for kids to learn that money is something that is earned. They need to understand that the products or services we need in life are provided in exchange for money, and the value or worth of what is being sold is up to the seller to determine. There is no way to purchase an item or service when you don't have money

Another good topic to cover is the importance of saving money. Let them know that a child with a two or three dollars could buy candy that will only last about 10 seconds, or even a cheap toy that will likely break in about 10 minutes or be forgotten about the next day. However, if that child saves the money, they can buy a better item that will probably have more value and last longer.

Have A Savings Plan

To develop a savings plan, help them decide on a percentage they can save each time they earn money. Ten percent is a good amount to work with since all they have to do is move the decimal point one place to the left. That will help them to see that for every dollar they earn, ten cents can be saved. You can also show the other examples too.

Make sure that they know that the account is not for the better short-term item, but for a "rainy day", a car or even their college fund. With the remaining 90% they get the candy or "better item" that you previously told them about. This principle is a good way to teach the about child being discipline and saving for long-term savings; like when they want to buy a house or retirement when they're grown.

Sure, a six-year-old won't understand the "rainy day" concept, and driving in ten years may be discouraging. But after saving 10% over the years, it'll add up. This teaching is especially helpful when they get their first job and are already in the habit of saving that 10% for long-term use.

You can also share with them about putting some money to the side to give to a charity they are interested in. Concepts like this teach them even more about managing their money.

As Your Child Grows

Once your child is old enough, take them down to the bank to open a savings account in both of your names. Take them to the bank once or twice a month to put so that they can deposit their savings. When the bank statement comes sit them down and show them how money is grows with the help of interest.

It is a good idea for them to know that interest is a big part of saving and spending. With interest you either pay more or earn more; it all depends on what the interest is for. It is a good idea to show teenagers that if a debt is not paid for in 30 days, they will end up paying more for an item than the purchase price.

One of the best ways to teach about how good or bad interest can be is by role-playing. You can find an item your teenager wants to pay for with a credit card as an example. Make a chart showing that by only making the minimum payment, it will take longer and cost more because of interest.

On that same note, take the number of months it took to pay off the credit card and show how much interest he/she'd be making in a savings account while putting money away to save for that item. The amount of interest isn't much, but the point to make is if you save money to purchase the item, you will only pay that sum without the additional cost of interest.

The purpose of teaching your child about money is to get them to see the value in proper money management.