Money. A topic shared by all of us. Critical to daily life in modern society. Yet it carries enough emotional weight and sense of importance that it can lead to extreme division, extraordinary greed, and too many other issues to list here.
Money topics are so commonly related to misunderstanding and conflict in relationships that it's usually a key factor in divorce. Our understanding of money is distorted by myths, stories we're told, stories we tell ourselves.
Most of us are not equipped with the tools to properly and diligently manage our financial affairs. And this can lead to great distress. Internal and external conflict. Anxiety, Fear, Doubt, Uncertainty.
Yet when properly managed with a set of learned and practiced skills, it can be force of freedom.
Fortunately we all have the ability to learn, to change, to progress.
And even more encouraging is that if you have little ones, like me, there's a chance to set them up early for better success with their resources.
Teaching children about money is an essential skill that can set them up for financial success in the future. However, concepts around money are often not taught in school. Part of the reason for this is that we don't have enough people qualified to teach the complexities.
In the interest if getting started, here are some effective ideas to help you educate children about money management:
- Start Early: Introduce basic money concepts as early as possible. Even young children can learn about the value of coins and the concept of saving. Show them each coin, what it's made of. Show them pictures of different metals and talk with them about the uses of copper, nickel, silver, gold.
- Use Real-Life Scenarios: Incorporate money lessons into everyday activities like grocery shopping or playing "store." This helps children understand the practical value of money. My kids on occasion will set up a "store" at home and invite us to peruse and buy. They have also asked to help them do fun videos advertising goods & services, giving them a chance to "pitch" and develop an early understanding of the sales process as well as articulating & conveying ideas clearly and succinctly.
- Give Allowances: If they're old enough, provide a regular allowance to teach children about earning and managing money. Encourage them to allocate portions for spending, saving, and giving. You may not want to do this is exchange for all chores, because they also need to develop a sense of purpose as part of the family. They need jobs to do in order to feel connected, important, needed, purposeful, responsible. But additional jobs outside of chores and/or putting in extra effort could be a great opportunity to reward them.
- Create a Savings Jar or Piggy Bank: Provide a container for saving money. Let children physically see their savings grow as they add money to it. I have started using one piggy bank for each child, and then one "community" account whereby they can allocate some toward a fun future thing, be it an event, a special dinner and/or movie night, a treat, and then eventually toward a trip together. They're starting to negotiate what they put into this shared bank. It's fun.
- Set Savings Goals: Help children set achievable savings goals, like saving for a toy or a special outing. This teaches patience and the benefits of delayed gratification. Show them the real cost of items and letting them decide how much to save and reminding them that once the money is spent they'll have to save again.
- Use Three Jars Method: Separate from the 3 piggy banks idea that I use for my kids, this is a method of dividing savings and/or allowance or money gifts into three jars: one for spending, one for saving, and one for giving to a good cause. This teaches budgeting and generosity. Then you can talk with your kids about what interests them most and research where you'll give.
- Teach Budgeting: As children get older, involve them in creating a basic budget for their spending and saving goals. Even 1st grade is not too early to start, as long as they're working with basic math. Help show them what toys cost, what food costs. Have them list their favorite foods from the grocery and then organize them into a list.
- Play Financial Games: Board games like Monopoly or digital games that simulate managing money can be both fun and educational.
- Involve Them in Family Finances: Depending on their age, involve children in discussions about family finances. This can provide a broader understanding of money management. Openness (within reason of course) is key. Many of us in Gen X for example did not receive a level of openness about money because it was generationally considered sort of "taboo". There's a need to save face in light of circumstances. Yet being honest helps work through challenges and grow through active application of better habits.
- Use Real Transactions: When shopping, let children handle the money and make simple transactions. This helps them understand the value of items and the process of making purchases. I like this particularly when they're purchasing something for themselves from their savings. I'll never forget my daughter's first exchange. She wanted her own purse, her own dollars, and to hand them to the cashier herself, not through me.
- Discuss Needs vs. Wants: Teach children the difference between essential needs and wants. This helps them make informed spending decisions. This is a conversation we've had for fun in the car. We make lists of things that are basic needs, then more advanced needs, and then different types of wants.
- Encourage Critical Thinking: When children express interest in purchasing something, ask them questions. But by all measures avoid shaming or guilting statements. And let them figure it out by asking open ended questions instead of leading them to what you want as an outcome. They're smart. They'll figure it out.
- Model Responsible Behavior: Children often learn by observing their parents. Model responsible money management, budgeting, and saving behaviors. Can't overstate this. For any aspect of parenting.
- Open a Savings Account: When they're ready, open a savings account for your child. Let them deposit their savings and watch it grow through interest. I've also started showing them the concept of getting a return. Like handing me a dollar and I give a dollar and a nickel back. Fun process of learning.
- Discuss Entrepreneurship: If appropriate, encourage children to explore simple entrepreneurial endeavors like a lemonade stand or selling crafts. This can teach them about earning money through effort and creativity. When I was planting for the summer, my kids asked me if we could sell whatever vegetables and fruits we didn't eat. Then they commented that they would rather grow more things and take them to the local farmer's market events than to set up a lemonade stand. They're learning!
- Teach Them About Debt: As children mature, introduce the concept of borrowing and debt, emphasizing responsible use and repayment. The concept from above (teaching them return) works in the opposite direction. You can role play what happens when they want something and don't currently have the money. Then show them what happens when you give them the money for it but write a promise note saying that they have to pay you an extra amount back later. Watch how quickly they change their tune!
- Explore Philanthropy: Teach children about the importance of giving back by involving them in charitable activities or encouraging them to donate a portion of their savings. We covered this several points back. Talking with them about the things they find interesting, fun, or heart stirring give you an opportunity to share stories, research ways to give. And remember, time and presence can be more valuable than money.
- Talk About Financial Mistakes: Discuss both your successes and mistakes related to money. This helps children understand that mistakes are opportunities for learning and growth. Undoubtedly being more open, within reason of course, and within a set of healthy boundaries, can help kids understand that we're all human and we all make mistakes. What we do with the understanding is what matters.
- Teach them that money is a tool, a resource. And that's it. It's not "life". It's not "purpose". It's not the end goal. People are inclined toward different things. Personally I believe that we should put the "locus" outside of self in life. Money is not something to be glorified and served. It's simply a tool. A resource. Something we use as a mode of exchange for other things.
Hope you found these to be helpful. Please share your own ideas in return. We're all in this together.