My father always used to ask me “Do you think money grows on trees?” and back then at the ripe old age of 3 or 4, yeah I probably did think that. It’s difficult to tell if kids truly understand the value of a dollar. Kids aren’t born with financial literacy knowledge or the budgeting basics. They need to be taught how to properly manage money, and you may not realize it but you’re teaching them every single day. They watch how you pay for things, how you handle your money, how you buy stuff, how you write checks, deposit money, and get cash out of the ATM machine. Your actions teach them money lessons all the time, whether intended or not.
Did you know that children as young as three years old can sense money troubles within their family and are usually aware of tight family budgets? Recently, a friend of mine told me that she was stopped for speeding (again). Before she could pull her license out of her wallet, her daughter yelled to the officer from the back seat. She said “Please, don’t give my Mom a ticket! She can’t afford one!” My friend felt so guilty because she hadn’t realized that her daughter was silently worrying about money problems right along with her.
Kids are more perceptive than we’d like to admit. So we must ask this question: Do kids understand the value of a dollar? It’s a balancing act to show kids how the household finances are managed, while not laying a premature burden on them at the same time. It’s a particular challenge for single parents whose budget is usually way more limited.
Some parents fear that the “money talk” will make the world seem TOO harsh TOO soon for their kids. But it doesn’t have to be that way! Parents can show their children the benefits of proper money management, and teach them the true value of a dollar. Your kids can learn to build good habits with money that will help them now and well into the future when they leave home.
Here’s some advice, tips, and tricks to help you explain proper money management and the true value of money to your children:
Respect – Teach them to respect money and the purchasing power that it holds. When kids are old enough to handle money without sticking it in their mouths, ears, or nose, let them handle it. Show your kids your best financial skills in your daily routines by including them in errands like grocery shopping, stopping at the bank, writing a check, paying a bill, etc.
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Wants vs. Needs – Let your children beg for something when you go to the toy store. Then, politely explain the difference between a want vs. a need. Talk about wants, desires, and wishes and how they differ from basic needs like food, clothing, medicine, and education. Dispel the thought that most kids have that mom and dad will make every wish come true instantly. It’s okay if they get upset and practice some temporary age appropriate feelings about not always getting what they want.
Include Them – If you show your children how you manage to live within your means on a daily basis, then you’ll be teaching them how to live independently as an adult. Let them help you with meaningful everyday tasks such as making a grocery list, clipping coupons to save money, buying generic items at the grocery store instead of name brands, and paying for everything at the checkout line. This will help them understand what a necessity item is, how to save money, and also that these necessities require money to buy them.
Allowance or No Allowance – This is really up to the parent whether or not they should give an allowance to their children. If you decide that you want to give an allowance, be sure you aren’t giving it for just any old reason. Chores such as making the bed, cleaning up toys, homework, or putting dirty clothes in the hamper should not be rewarded by giving them money. These chores should be performed regardless of allowance because it shows appreciation for mom and dad, family support, and helps them feel like contributing members of the household. Allowance should be saved for “extra” errands that are performed like recycling, feeding the cat and/or dog, raking the leaves, sweeping the floors, etc. Make an agreement on which chores deserve an allowance and set standards for a job well done.
Save, Spend, and Share – Teach children the importance of Save, Spend, and Share to help them learn what the real value of money is. Find ways to make saving, spending, and giving money tangible and FUN! Find some old mason jars or coffee cans that can hold coins and maybe even some dollars. Make sure to divide each jar up into a “Save” jar, a “Spend” jar, and a “Share” jar, label each as such. Let your child put the coins or dollar bills in at least each jar per week. If your child wants to save up for something more costly, tell them to put the remainder of their earnings into that jar.
Knowledge is Power – Pay your bills or balance your checkbook in an area where the children can see you. Let them ask you questions and explain what it is you are doing. Before you purchase a big ticket item, show them how you do a price comparison, read online reviews, and do other consumer research before you buy it.
Books, Books, and More Books – Let your children read books about money or read the books to them if they can’t read yet. As with any other topic children need to learn about, there are books available that can help them understand. These books provide good information and open the door to “teachable moment” discussions. Some books that I recommend are: The Coin Counting Book by Rozanne Lanczak Williams, Neale S. Godfrey’s the Ultimate Kids Money Book, Money (DK Eyewitness Books) by Joe Cribb, and for the really young kids – The Berenstain Bears’ Trouble with Money by Stan Berenstain.
Educate Yourself to Help Educate Them – It’s important that you are well educated on money matters before you try to teach your children about it. There is a ton of online resources out there for parents and children. Some of my favorites are:
- Teaching Kids about Money — http://life.familyeducation.com/money-and-kids/parenting/47213.html
- Money Talk for Parents — http://www.aces.uiuc.edu/vista/html_pubs/moneytlk/teachchl.html
- Common Cents — www.statefarm.com/learning/kid_stuff/kid_stuff.asp
- Kids.gov — www.kids.gov/k_money.htm
- U.S. Mint — www.usmint.gov/kids/campCoin/kidsGuide.cfm
It can be a daunting task and a scary one, when we set about teaching our children the value of a dollar and how to properly manage money. But rest assured it is one of THE most important lessons you can teach them to help them succeed in life. Look into local free outreach programs or classes that you can bring the kids to. Sometimes one-on-one or hands-on learning is the best kind.
If you need some money lessons of your own like how to budget or how to get out of debt, give us a call today. We offer free credit and debt counseling over the telephone, in-person, or online 24/7. We are a national Non-Profit credit counseling agency that has been assisting consumers for over 45 years.