Money does make the world go around, but it cannot buy happiness. Have you ever used one of these idioms with your kids? Non-English speakers don’t always get the nuances of our language, and neither do kids. If the world needs money to run, why can’t we buy happiness with it? You and I know it’s not that simple, but money is complicated. I am here to help with some advice on the what, when and why of financial education and money management 101 for kids (and maybe some adults).
What to teach kids?
What is the most important lesson to teach kids about money? To handle it wisely, of course. What should your kid do with his or her birthday or holiday money? Do you let them spend it all or make them save a portion? To handle money wisely, kids need to understand it’s worth, how hard mom and dad (and later, them) work for it. Teach kids money can buy essentials and even extras, but no amount of money or material objects can bring true happiness. Kids should be taught to save some, spend some and donate some to a worthy cause.
Save? Yes, even little kids can save money. If my kids get $50 in total for birthday money, from well-meaning friends and relatives who didn’t want to or weren’t able to shop, I make them save some. How much is up to you, half, a quarter, something. Kids can open savings accounts and watch the money grow; I recommend a credit union so they can earn interest too!
Spend? Why not? You can’t take it with you and it was given with the intention of getting the kid something they want or need. Teach kids to choose what to spend their dollars on by helping them think about what they want, need or how long something will last or be useful. Help your kid choose not to spend too much money on junk or candy that will break or make them go sugar-crazy.
Donate? Yes, kids can learn to be philanthropists at a very young age. Kids can make a difference and it’s up to us, their parents, to teach them. Whether your kid gives at church or to the local food bank, show them that even a small amount of money donated can go to help real people in need. This doesn’t have to be a huge amount, but can be a small portion, to teach your kids that money is meant to be used for good for all, not just the person who has the most.
When to teach all this?
Start young, like open the savings account when they are little. I have an aunt who gave each of my children their first piggy bank. We opened one for each of our girls who are now teens and they each have several hundred dollars in savings, for educational use or to get a car when they graduate. My six year old gets birthday money and I let him spend some at Benny’s (on some cool remote control units) and even let him buy some candy at the penny candy counter in town (yes, we still have one and yes, they still sell penny candy!). Each child has a savings account and we even add to it when we cash in our pocket change once a year (it’s also a math problem for the older kids to see how much they each get). Like many other conversations of childhood and youth, this is another ongoing chapter, with layers of learning over time.
True, the world is going to heck in a hand-basket and people are filing bankruptcy or just collecting benefits from the state if they need. This is not financially healthy or responsible and we must teach our kids the value of hard work and saving. While I have not always been financially successful, without the basic training my mom provided, I wouldn’t even know how to handle a dollar. Even my Au Pairs and Host Families can see the benefit of teaching kids to be financially responsible. Knowing the difference between want and need and how to make hard choices is part of the job, too. If you want your kids to be able to provide for themselves and their families, teach them the basics of money management as a life skill. They won’t regret it.
With finances being part of the dinner table discussion, your kids can start to understand what it takes to run a household, a little at a time of course. They can begin to understand why they can’t have or do everything they want. You may not want to burden your kids with your own family’s financial difficulties, if you have any, but it is your responsibility to teach them the cost of products and services in relation to household income. Have your kids participate in saving for things, of varying amounts. Save for a special meal out or a day trip; save for a large family expense, like a trip to Disney, by contributing to and watching a special account grow over time. This will help them appreciate the things you do spend on and value the bigger things even more. Just don’t say nothing, don’t just hand them money. Make it a conversation, you know, a teachable moment, to last beyond childhood.