Teaching Kids About Money
Did you know that only about half of the states in the U.S. insist that schools teach children about personal finance? They teach our children about math and calculating compound interest but not much about how to manage their money. No wonder so many people get into trouble with credit cards and debt after they leave school!
This, therefore, means teaching your kids the value of money and how to manage it comes back to parents. And, that’s probably the best place for that type of education since how one manages money is very dependent on the values about spending, budgeting and saving that parents’ have instilled.
Kids can learn about the value of money from about kindergarten age. At that point they understand that money is used to get the things we want.
Showing your children the fundamentals and the value of money can have long lasting effects, it can be fun and useful at the same time. Start small and work you way up; you might even continue their education by giving them the chance to pay a restaurant bill or making a bank deposit.
What follows are several games that will enable your kids to start understanding what money is all about.
Needs vs. Wants
Advertisements on TV, billboards, magazines, etc. are a good starting point for talking about money – how and why we spend it.
Talking about needs and wants: Recognizing the difference between needs and wants is an important part of this discussion. Get the family together, including the parents, and have each person talk about their various wants and needs. This will give you and your children a good idea of everyone’s current preferences and the values they place on those things. Since this issue is at the heart of every financial choice we might and some might say, the country’s current economic difficulties, this discussion needs to continue through the child’s teens and young adulthood.
Where does the money go: Usually children only see how money is spent, they don’t see their parents budget, save parts of their pay check or pay bills, give a portion to charity or even how they earn the money in the first place.
Kids need to get a picture of how money comes into the household and how it goes out. One way to introduce these ideas is to show kids how to budget by having a handful of coins that represent all the money that comes into the household, say $10. Separate the number of coins that represent the amounts paid for rent/mortgage, taxes, food, utilities, entertainment, car payment, vacations, savings and any other regular payments made from the money Mom and/or Dad earn. Then show them what remains once everything is paid.
This will show your child/children where the money goes and how little is left over for the impulse spending they’d like to do every time you go to the store.
Getting the most for your money: when your child is old enough and understands math, take them along on a grocery shopping trip. Give them a list of a few items to find – items that might total $10-25. Put a dollar amount next to each item (a non-sale amount), like $1.50 for a 5 lb. bag of potatoes or $2.75 for a gallon of milk (these amounts will differ according to where you live) . Then ask your child to find each item for the amount marked or less. Add a little spice to this exercise by saying they can keep the amount they save on each item but if they go over, they lose part of what they’ve gained or they will have to put back any treats they expect to buy.
Take this exercise to another level by buying two different brands of the same item, differently priced. Then do a taste test (a blind one, of course) to find out if everyone in the family thinks one tastes better (or not) than the other. Ask everyone if the difference in taste is worth the difference in price.
This will give children a good idea of whether or not a branded item is really worth the difference in price with an unbranded one. Kids can get really hung up on having a specific brand of something – nothing else will do, until, that is they test it out for themselves.
The money you save could be your own: Turning off lights can be a real challenge in most households. But what if you made it a family project to reduce a particular cost of living such as the electricity or water bill and the amount saved would go toward a special treat for everyone.
Choose one bill and track what is saved over a period of several months by turning off lights or not running more water than necessary, etc. Kids will learn the value of economizing in order to get something they really want. It might encourage the entire family to make sufficient effort that will have a real impact on the family budget and reward everyone.
There are many other games and activities that families can do to teach kids about money – how to spend it, how to save it, how to economize wisely, how to put off gratifying wants immediately, etc.
Ultimately it is the family that passes on the values surrounding money with which children will go forth into the world – with that knowledge they will spend without thinking or save for a rainy day.
It’s your choice, please choose wisely.