5 More Age-Appropriate Tips On Teaching Kids About Money
A few months ago, I wrote a post that listed resources for teaching kids about money. This is a topic with which I have no real personal experience, since Mini is my first child and he is only two, so I think it’s an important topic to keep researching as he gets older. I know that many children (myself included) grew up without any kind of personal financial instruction from their parents or from the school system–though they will probably not use Algebra again, they will certainly need to know how to calculate the tax in a restaurant, but still the personal finance courses are electives where they are available at all. Hopefully this will change in coming years, but if not I’m hoping to instill some understanding of the value of money and money management in Mini while I still have him within arms reach. Here are some of the better tips I’ve culled from my reading on teaching kids about money in recent months. Please add your own in the comments if you see any I’ve missed.
My ongoing research on the topic of kids and money led me to a column from
- No matter how little you know about money, you still know more than your kids. Janet Bodnar, Kiplinger‘s Personal Finance Editor, points out that it’s essential to keep things simple when you’re talking to kids about money:
They’re not going to ask you how TARP funds are being distributed or even for a rundown of your family’s balance sheet. They’re likely to ask far simpler financial questions: “Why can’t you get money out of the bank machine so we can go to McDonald’s for lunch?” “Do you have 20 bucks so I can go to the mall with my friends?” “Can I have [fill in the blank]?” . . . And even college students really do think that as long as you have checks in the checkbook there must be money in the account.
I do find the last one a little bit difficult to believe, at least on a mass scale, but I guess that it is true. It’s not like Mini is going to ask me the difference between a Venture Capitalist and a Financier. At least not tomorrow, anyway.
- Use similies to compare larger institutions to smaller ones. You can explain what a bank ATM is to a preschooler by explaining that it is kind of like a piggy bank for adults: sometimes a piggy bank is empty, and so is the ATM if you do not deposit money. As they get older, you can use the allowance to explain what a budget is to a middle schooler, and make high schoolers practice budgeting on their lunch allowances a month at a time.
- Reassure kids about the family’s financial picture. As your kids grow up and become aware of current economic conditions, they will crave some kind of reassurance about the family’s financial picture. They don’t necessarily need to know every detail about the family’s income, but they do need to know enough to know that they will have food on the table and a roof over their heads. If you are facing a financial crisis of some kind–job loss or home foreclosure–you should not hide this from your children. You should discuss this with them and tell them about your plan for dealing with the situation. This will make them feel more secure because it will make them believe you are handling things.
- Give smaller bills. Paul Richard from the National PTA suggests that allowances and gifs of money should be given in denominations that encourage spending, e.g. give a $5 allowance in one dollar bills, so that they can have a visual understanding of budget categories in the bills ($1 set aside, $1 toward a toy, $1 toward a gift, and so on). Try to get them to put at least one of the bills into savings, even very early on.
- Once again, visual representations go a long way. I found the piggy bank featured in the header to this post on Money Savvy Generation and I think it’s a great first step for Mini. I like that not only does it have the four separate areas for savings, but that you can see each category and watch it grow relative to the others, even long before Mini can possibly understand what the different categories mean. The visual idea of money growing is powerful, especially at this age where they are so swayed by the way things look. Awesome!