Growing up in a time of economic struggle, today’s kids might be inadvertently learning lessons about money. If Mom and Dad have been forced to cut back or have even lost their jobs, chances are kids have noticed and learned something as a result.
Even if parents have managed to weather the economic storm of the last several years without making too many sacrifices, they can still start teaching kids about money, even if kids have just entered kindergarten. It’s never too early to teach kids lessons about money. The following tips are a few ways parents can do just that.
Susan Taylor, consumer and family economics educator for the University of Illinois Extension, writes that using money wisely is a basic life skill that grandparents should teach their grandchildren at an early age. “Even if you have little money in your home, look for ways to involve the children in deciding how to spend it. Help your children understand how money is used to pay for goods and services.”
Communication is the key. If they are old enough to understand, have a family meeting and talk about your expenses and your income. Ask for their help in deciding how the money is spent.
Give kids an allowance.
Many parents give their kids an allowance so they can have some spending money when out with friends. But giving an allowance is also a great way to teach kids about managing their money. Start with an amount that is small but large enough for kids to make purchases. In so doing, kids will learn that things they want cost money and that properly managing their money will enable them to purchase the things they want. If kids spend all their money by Monday and don’t get their allowance until Friday, resist the temptation to give them more money if the kids ask for it. This, too, will help kids learn the value of managing money. Susan Taylor suggests parents decide with children which purchases the allowance should cover. “Misunderstandings often occur when you don’t talk things out,” she writes. Taylor says that as a part of the allowance children should be encouraged to make regular gifts to charity as well as saving.
Open a savings account in your child’s name.
Another way to teach kids about money is to open savings accounts in their names. Once the account is opened, take your child to the bank once a week to deposit a predetermined amount of money. This shows the child the importance of steadily saving money. It might be difficult at the outset to get kids into this habit, but once they make savings deposits part of their routines and their balances start to grow, they will likely grow more enthusiastic about their weekly trips to the bank.
Encourage kids to document their finances.
Encouraging kids to write down their finances, including deposits, withdrawals and expenditures, is an effective way to teach them basic financial analysis. If the bank supplies savings books, make sure kids use them. But go one step further and give kids a financial journal where they can document all of their purchases in addition to their deposits and withdrawals. Such documentation enables kids to analyze how they spend their money. Periodically go over these expenditures with children, and if they’re frustrated about their saving and spending habits, work with the children to develop more effective strategies. Kids may appreciate these small lessons in analysis down the road when it’s time to purchase their first vehicles or finance a larger expense, such as their educations or even their first homes.
Help kids make larger purchases.
Helping kids make larger purchases, be it a new bicycle or a video game console, is another way to teach them about money. Such purchases teach kids about long-term financial goals, and how it’s necessary to stay diligent with savings in order to meet those goals. Paying for half is a good way to reward kids for meeting these long-term goals.
Teach children to use credit wisely.
Credit will likely be part of their future. It is good for children to learn that they can borrow money, but they have to pay it back.
This article appears in Capital City Parent July 2012.
