April is National Financial Literacy Month so it seemed fitting to write about teaching kids money management. Money is one of those touchy subjects. I am not a financial expert (my husband is), but I do understand the impact money has on people from a psychological perspective. Money sparks a lot of different emotions in people.
It’s amazing to me how such an abstract concept as money has so much power in our society. Relationships are broken because of money issues. Crimes are committed because of money. Why is it that some people hoard money while others spend like there’s no tomorrow? I believe it has lots to do with how people were taught money management as a child. I’ll be the first one to say that money is not everything and cannot buy true happiness. However, money is a huge part of our lives whether we like it or not. Ignoring this reality does not help us. Therefore, we need to teach our children the value of money and how to manage it so they can obtain a better quality of life as adults. The goal is not to worry our kids about money or for them to become scrooges, but to teach them a valuable life skill that requires constant refining.
We have been teaching our son about money since he was four years old. We are very conscious of how we teach him so as not to worry him about money or for him, but to do it in a fun and educational way. There are three core principles we follow. First, consistency is very important. We make sure both my husband and I are on the same wavelength when communicating (verbal and nonverbal) with our son about money. Second, we believe the sooner you start the conversation about money, the better because children have more opportunities to learn with more time. Lastly, we try our best to be good role models when managing our own money. We have a four pronged approach when managing money: money for basic needs, money for wants, money to save, and money for gifts/donations.
Here are some activities we do to help our son understand the value of money and learn how to manage it. I hope this is helpful to you!
Some Activities to Consider:
1. The Piggy Bank. All the money our son gets as gifts goes in the piggy bank. Sometimes, our son finds coins in the house and asks if he can put in his piggy bank. Love it when he does that!
2. Periodically we take a trip to the bank with the piggy bank money. We take the coins into the coin chamber and have him count the sum. Then deposit the money in his account.
3. When shopping, we check the price tags and compare prices. Once, I took him shopping for a gift in a very little shop and he looked at a price tag and yelled “this costs $45 Mom”. People around gave us a funny smile. I wasn’t quite sure to be proud or embarrassed. At the end, I decided to be proud and praised him for figuring out the price.
4. Give choices. Periodically, we give him choices on how he can use his money. For example, when my son lost his first tooth, the tooth fairy left him $20 under his pillow (tooth fairy was very generous that day because that’s all she had in her wallet!). Anyways, he was given the choice of using $5 and putting $15 in the piggy bank. Our son decided to put the $20 in the piggy bank and save it for when he’s older. I was very happy with his decision and praised him for being so responsible with his money. Few days later, he lost another tooth, and this time the tooth fairy left $5 and my son looked at the bill and said “oh man, that’s all.” I could only laugh!
5. We take periodic trips to the Dollar Store or Five Below (love that store!) and he gets $5 to spend his money any way he wants to. This becomes a fun adventure when he contemplates whether to spend all of the $5 on one thing, or buy 5 things that’s $1 each, etc. It’s lot of fun watching him run around the store and calculating to maximize his benefits. This shopping experience can go on the whole day, so I have to impose a time limit.
Great Resources on Money Management:
1. Financial Expert Suze Ormon (we love her)! She used to say we should try to live within our means, but given our current economic crises, she now says that we should live below our means.
2. The Canadian show: Til Debt Do Us Part (Financial Wizard: Gail Vaz-Oxlade)
3. Kiplinger’s Magazine
4. Money Magazine
Happy money management with your kids!
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