As a financial educator and counselor, one of my biggest pet peeves is the way our young adults have no clue of financial matters. I really feel that we as a society are failing them completely in this area. Because of this, Popeye and I want our children to learn these things early (and well).
Here are a few steps we’ve taken:
1. TALK about money in front of, and with, the kids.
How many times do we laugh (or cringe) when our children repeat something we swear they weren’t paying attention to? They do listen. Monkey #2 likes to tell people where his daddy works, and what he does, and he’s actually quite accurate about it for a four year-old! With both of us working in the financial industry, it comes naturally that we talk about money and financial topics a lot in our household. It helps us both stay sharp, and it helps us see things from different angles. And as our kids age, we hope that it will be a natural way to teach them the basics, and to keep the conversation open to questions.
2. Show them the “value” of saving at an early age.
Ever since Monkey #1 was big enough, he has loved to play with coins. Popeye’s parents keep a jar of spare change at their house, and when he was about three, we would let him empty it, then drop the coins back in. From there, we decided it was time to start a piggy bank. Now, he loves to collect loose change (sometimes even emptying out my hoard in the car without my knowledge), and add it to his piggy bank. We make a point of taking it to the bank to count, and depositing it to each of their accounts. And the in-laws do the same when we visit. The Monkeys love seeing their deposits grow!
3. Our attitude toward spending and saving.
On a similar note, we are cautious with HOW we talk about and act toward money. We are cautious not to say things like, “we can’t afford that” or “it’s too expensive.” Instead we say, “it’s not a priority now” or “we don’t need that.” We want our children to think of things in terms of importance, so they inevitably learn how to budget the money they have.
We also don’t force savings/charity. There are many ideas out there to make a child save and/or donate a certain percentage of any money they get. As a financial counselor, I prefer encouragement over enforcement of this idea. The natural human reaction to a rule is to want to break it, as it has a negative connotation in the mind. And this can lead to problems later when financial wants are tempted to override financial wisdom. It also doesn’t teach as much as letting them make their own decisions when the consequences are minimal. But when you encourage a child to take a small portion of what they have to people less fortunate, even allowing them to choose where it goes, you are teaching them a host of things: benevolence and compassion, decision-making skills, and even the harsh reality that the world isn’t a perfect place.
One thing we do, and our boys love it, is save for our local women’s resource center. They give out plastic bottles to put loose change in, and then you return it, and they use it to donate baby/maternity items to women who can’t afford it. My boys LOVE getting at least a bottle each (this last time, they both wanted two), and seeing who fills theirs faster. Everything is a competition with my older two, and in this case, I encourage it.
4. The dreaded chores.
We are a chores family. We may do an allowance at some point in the future, but our kids are really too young to understand anything other than cause and effect, so we pay them small amounts for doing certain things to help (in addition to the things they are just expected to do: clean after themselves, put things away, make their bed, etc.). I guarantee you will learn just how much your kid can really do when they’re motivated; I certainly have!
5. Wants verses Needs.
This is forever a work in progress, but we try to discuss with each of them the difference between things they want and things they need. In my experience, that is most common issue in financial problems and bad decisions. So when they ask for something at the store, I try to immediately respond with, “Do you need it, or do you want it?”
6. Teaching delayed gratification – saving up.
When they do have something that they really want (and we’ve agreed to), we make a decision about how they get it (birthday gift or save up). If they have to buy it themselves, we tell them how much it will cost from their savings account, or how many dollars they will need to save up to get it. Most times, if they’re told they have to save up, it is suddenly not as important to them! But we want our children to learn that anything good is worth waiting for.
7. Teach them how to shop smart.
But when they do want to, we compare prices, look for discounts, etc. to make sure we get the best price. I want my children to know how to be a wise consumer, even when they decide to splurge. I also want them to learn that it is not a matter of not affording as much, but being wise with the money we have.
We certainly don’t know all, but there are a few of the details that are important to us. What are some ways you are approaching this with your kids?