Sep
Teaching Kids About Money
I read an article about kids and money at CNN (which unfortunately no longer appears to exist online–otherwise I’d link to it). While most of the article deals with late elementary and older children, there was this comment that struck me:
“Kids need to get involved with money and they need to handle it,” said Bob Nusbaum, a financial planner in Pittsburgh, Pennsylvania, who said exposure can start as early as age 4 or 5. “Parents need to involve their kids in financial decisions as soon as they are old enough to grasp it.”
I absolutely agree with this, but to be successful, parents need to have some realistic expectations of the process and what four-year-olds grasp.
First of all, money is an abstract concept. Even after parents pair the concept of $1.00 with the concrete example of 2 candy bars, money remains arbitrary and abstract for a while. Patiently keep working with your child and keep things as concrete as you possibly can. With repeated exposure to money concepts, children get better and better at associating the concrete and abstract.
Let them handle their own money. Begin teaching coin recognition. At first, kids will think that dimes are not worth as much as pennies because they are think that value relates to size. Practice names of coins, sorting coins, identifying coins by the front and back, and how much each are worth.
Use money to teach about delayed gratification and savings. If your child wants a treat at the store, ask if they have the money for it. And then hold firm if they don’t have enough! You can do it!! When they get money, teach them to save first. This works better if your child has a realistic goal to save for, such as an inexpensive new toy. Make a big deal about it when they save enough to purchase the toy, and reinforce how good it feels to achieve this kind of goal. Here the purpose is to pair the external reward of the toy with the internal reward of feeling good about savings and reaching a goal.
Also, you might consider starting out with relatively small amounts of money. Children will want to play with their money or get it out and count it or show their brother or something else like put in their mouths and accidentally swallow it. You’re going to feel more patient if they only loose a quarter or two and not a ten-dollar bill.
And, as I promised in the video, here is the picture of our family’s bank box. It’s what we use to help the kids understand the value of the various coins and how to exchange them for different denominations.
Finally, the question of if and how you provide your child an allowance tends to be a debate among parents and child development specialists. Everyone has an opinion and a reason why it’s the best opinion. My opinion (like you care): what works for your family is the right thing for your family. Be flexible as you figure out what’s “right for your family” and then ignore everyone else, secure in your knowledge that you’re doing the “right” thing.
So what has been “right” for your family? Leave a comment and help me find my way with allowances and a seven-year-old. Give the rest of us some ideas to try out.
05Sep
I just stumbled across my quote in your blog. I absolutely agree that people need to find what is “right” for their family. My daughters are 6 and 8. More important than the nuts and bolts of money are the fundamental concepts and values that it is based on. Kids need to understand that money, like everything else, is a limited resource. Every dollar that is spent on something cannot be spent on anything else. It’s all about choices. I tell my daughters that we can afford almost anything we want but we can’t afford everything we want.
Regarding allowances, they did not work for us. What has worked extremely well with my older daughter is having her earn her own money. She walks dogs and brings in mail for neighbors when they go on vacation. We also joined a web-based coupon service called the Grocery Game. She is responsible for cutting out the coupons and helping me shop. She gets to keep some of the savings. It has been a win-win-win situation because she has learned a lot about money and smart shopping, has earned her own money and I have actually saved money in the process. It’s beautiful.
Our country is over $12 trillion in debt. Our children MUST learn to be smarter with money and credit.
05Sep
I’ve watched 2 of your videos so far. You give a lot of great and insightful ideas. I really like this one on money. I’m also excited to try your favorite salt dough recipe, as ours didn’t go so well today. Thanks for the things you are doing to teach others. (P.S. You are such a pretty person…sure you hear this a lot, but I thought I’d tell you anyways.)