When it comes to teaching kids about money, the sooner you start the better. Kids are smart. They understand the concept of money long before they know how to add or subtract. They see you reaching into your wallet and taking out cash, or going to the ATM and getting cash, or they see you swipe your debit or credit card at the store every time you shop.
To help the next generations avoid the financial mistakes of their elders and to live financially fit lives, they need to be taught the essentials about money.
Beth Kobliner, author of the New York Times bestseller “Get a Financial Life”, and a member of the President’s Advisory Council on Financial Capability, which spearheaded the creation of Money as You Grow and offers age-appropriate money lessons for children, says children as young as 3 can grasp financial concepts like saving and spending. A report by researchers at the University of Cambridge commissioned by the United Kingdom’s Money Advice Service, revealed kids’ money habits are formed by age 7.
“The sooner parents start taking advantage of everyday, teachable money moments (for example, give a six-year-old $2 and let her choose which fruit to buy), the better off our kids will be. Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers,” Kobliner told Forbes.com.
Instilling good money habits is one of the most important lessons you can teach your children. Here are some ways you can help teach your children – no matter what age – about money:
Use cash. Showing kids purchases with a credit card doesn’t help show them the value of money. “Don’t [buy items] on credit cards or with checks, because it’s completely abstract,” said Eileen Gallo, coauthor of The Financially Intelligent Parent. “Let your kids hold the money and see the money leaving their hands.” For example, when your children are young, let them pay the cashier at the store and get the change back.
Give them a piggy bank. Buying a piggy bank or making a money jar is a great first step to teaching kids about saving money, spending money, and earning money. “A traditional one-slit piggy bank doesn’t teach kids much about money management,” said Susan Beacham, chief executive and co-founder of Money Savvy Generation in Lake Bluff, IL. To help kids see how their money is divided, Beacham developed the Money Savvy Pig, a see-through piggy bank with four slots: save, spend, donate, and invest. With the Money Savvy Pig, kids learn money isn’t just for buying things. Another similar idea is using four glass jars. Label one each for saving, spending, donating and investing.
Get on the internet. The Internet is full of age-specific money games for kids. PNC Bank and Sesame Street have teamed up to create fun videos and games to teach kids about money. They also created a free DVD and info kit titled For Me, For You, For Later, which teaches children how to spend, save, and share. The kit also guides parents how to talk to their kids about money. What kid wouldn’t find it fun to learn about money from Elmo and his friends?
T. Rowe Price also offers The Great Piggy Bank Adventure, which uses a talking piggy bank to guide children through various financial lessons. For older kids, themint.org offers advice for teens, as well as challenges relating to money. Senseanddollars.thinkport.org offers finance-related quizzes, games and information for teens. Kids can create a budget for the prom or a general budget; find out what it’s like to have a full-time job and manage a household budget; and discover the true cost of credit. With the “Time Warp” game, they can see what movie tickets cost in the past and learn about inflation.
Play games. Games can make learning about finance easy and even fun. “Games become something you can use to open the discussion, so it’s not always you preaching about money,” Beacham said. From well-known games like Monopoly, to the newer, but wildly popular Cashflow 101, there are a number of fun, educational board games available to help kids of all ages develop to master their financial management skills. OrangeKids.com’s Planet Orange lets kids travel through the solar system by completing certain jobs to earn money for gas. Other great games: The Game of Life, Payday, Charge Large, and Money Bags.
- Discuss how your family values things – both free and those which cost money. Talk about how your family decides what purchases to make, how you use coupons and credit cards, and how you save money, etc.
Let them make their own money. Allowance is a great teaching tool. “Negotiation skills are an important part of it, which they’re going to need for dealing effectively with friends, teachers and, eventually, their bosses,” said Jayne A. Pearl, author of Kids and Money: Giving Them the Savvy to Succeed Financially. The key to a successful allowance is structuring it right from the outset. Make it clear to your children what they are responsible for, to earn the money. Then, discuss with them what they want to do with the money once they’ve earned it. Encourage them to put some of it in a savings account each week.
Give back. Volunteering at a homeless shelter or feeding the poor at a soup kitchen with your children are just some examples of how you can give back to the community. “Five- to 8-year-olds are transitioning from being ‘me-centered’ to seeing themselves as part of a group. So, it’s a good time, developmentally, to talk about hunger and poverty,” according to Susan Linn, a child psychologist at Harvard Medical School. “They’re also becoming interested in doing something about the problems they see.”
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