Yesterday, I was in the bank drive-thru depositing some checks, when my almost-6-year-old piped up from the back seat, “Momma, why do you have to put your papers in that tube thing?” I explained that the “papers” were actually money that Mommy and Daddy got from working. We had to put them in the bank so that when we went to the grocery store later, I would be able to use my debit card to pay for our food and paper towels. “Oh, right,” he said. “We have to have money in the bank to use that card thingy.” Then he promptly returned to talking about things little boys talk about, and I reflected on the fact that he is always watching what I am doing and there are so many opportunities to teach him along the way.
Children learn about money management from their parents. Fortunately, you don’t have to be a financial guru to help your kids make good financial decisions. You just have to teach them a little bit at a time and get some help along the way. These sorts of lessons can be woven into everyday life. For example, when you are grocery shopping, you can teach about budgeting (we have $100 to spend on groceries today) and deciding between wants and needs (we have $7 left and can buy either a gallon of ice cream or a loaf of bread and peanut butter to make sandwiches for the week). When you are paying bills, you can talk to them about how much the cable bill costs and how many hours had to be worked to pay for it. When shopping for school clothes, you can have them choose between one name brand outfit and three generic brand outfits. These are all age-appropriate lessons that teach your kids how to begin making financial decisions in the real world.
By the time children are in elementary school, they are beginning to understand that money is limited. Help your children to understand how jobs and money work together to meet your family’s needs like in the examples above. At this age, children may want to hoard their own money, but they definitely won’t mind spending yours! This is a good time to start teaching them about wise spending and saving.
A simple way to start this conversation is by getting a divided “piggy bank” with sections for saving, spending and donating. Each time they earn or are gifted money, help them decide how they want to divide it up. Then open a savings account for them at a local bank or credit union and teach them how to deposit their savings. This will give them a great head start on responsible saving and banking habits.
If you are interested in getting your child some outside resources to learn more about money, check out some of these great titles.
“The Everything Kids’ Money Book” by Brette McWhorter Sember
“How to Turn $100 into $1,000,000” by James McKenna, Jeannine Glista and Matt Fontaine
“Growing Money: A Complete Investing Guide for Kids” by
Gail Karlitz and Debbie Honig
“Financial Peace Junior” by Dave Ramsey
You might consider reading them to learn a thing or two yourself!
What about allowance?
Children need to learn that basic chores are just a responsibility of being a member of the family and not something they get paid to do. Instead of linking allowance to chores, give a basic allowance based on the child’s spending responsibilities. (This is money that you would normally spend on them anyway — lunch money, entertainment money, clothing money, etc.) If your child would like to supplement their regular allowance, allow them to do extra chores to save money for more costly goals (special trips, expensive shoes, a new video game, etc.). This not only teaches children that chores are just a fact of life, but it also allows them to learn to budget their money.