Ever bought your child that candy bar or comic book at the checkout counter to calm a tantrum?
Most parents experience moments that tempt them to keep their children happy and behaving well—and often this involves money. But as the old saying goes, “money doesn’t always buy happiness,” especially when it comes to kids.
Starting at a very young age, kids learn about money, purchasing power, and responsibility. In fact, kids today have more money than ever floating through their hands-extra income to be spent on snacks, clothing, and toys. More than 10 million-40 percent of the Nation's children and youths between ages 10 and 18-receive regular allowances or handouts from their parents or guardians, averaging $50 per week.1
While kids and teens may have more money to spend than ever before, their understanding of money, values, and savings hasn't improved. For example, most young people don't know how a U.S. savings bond works or how to calculate interest earned on a savings account. For the most part, they don't understand how to manage debt or invest for future expenses like college tuition.2
Experts suggest that parents teach their children about financial responsibility. Early lessons will go a long way into fostering positive attitudes and habits later in life. Young children learn about money through everyday activities like grocery shopping, and watching their parents pay bills and withdraw cash from the ATM. Think of the central role money plays in how people relate to the world-from checking out at cash registers to paying a toll on a road to enjoying cable television.
Family discussions can help kids learn about money, saving, and wise spending. Of course, this does not mean worrying children about the bills or making them feel guilty for costing you so much. Nor does it mean arguing about money-one of the central conflict points in relationships in every home. What it does mean is explaining the basics: that there is a certain amount of money that comes into the household and a certain amount of money that goes out, or expenses-food, utilities, and clothing-that must be paid from that money.
These guidelines can help you talk with your child about money and finance:
Talk money. Routinely talk with your children the specifics of how money is earned and spent. Explain your purchasing decisions: “We are buying apples because they are on sale” or “We need electricity so I have to pay the bill.”
Model behavior. Children develop their attitudes and behaviors by what they see you do, not what they hear you say. A lesson on the value of money might also involve family activities: “We are renting a movie, instead of all going to the theater, because it costs less money. We are saving for our family vacation.”
Set limits. Even if you are able to buy your child everything he or she asks for, consider the wisdom of setting some boundaries. Learn to say no to your child and be firm. Teach the appreciation of things that cannot be bought. This includes working hard; facing challenges, obstacles, and frustrations; and achieving goals.
Provide freedom. As she grows up and learns more, let her make her own decisions around money and personal finances. Check in with her to help her understand what’s going well and what she can change. Help her learn from her financial mistakes.
Teach giving. Encourage your child to give some of his or her income to a charity. Your good feelings of sharing with others will help your child develop his or her own sense of charity. Teach contributing in nonfinancial ways by giving time, energy, and skills to help someone else.3,4,5
A personal piggy bank is a good way to introduce concepts of money and savings. The sooner a child learns to save, the more likely she will develop a lifelong respect for the value of money. She can save money for a favorite toy, as well as some goal in the distant future, like college, or a car.
A "family piggy bank" is a good way to teach children about money and about having unified goals as a family. Maybe you will save as a family for that special dinner out on the town or a fun vacation. As your child grows and attitudes toward money change, you may want to try a budget meeting where family members outline money concerns and goals.
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Ask a child this question and you might hear him say, "From the machine on the corner." Automated teller machines (ATMs) have changed the way we spend money. Kids see us taking cash out-but they may not realize that you must first put money in. Take some time to teach your kids how money gets into your bank account so that you can withdraw it from an ATM. Let your child go with you to the bank when you deposit cash or checks. As he grows, show him how to fill out a deposit slip and let him give the deposit to the cashier. With your guidance, your child will learn that money doesn't grow on trees-and it doesn't come from a magic machine. |
Allowances are a good tool for many families. The age at which a child gets an allowance takes place depends on the child's interest and maturity-every child and parent is different. There are three main ways that allowances work:
- Allowance is given to kids without being tied to any chores or responsibilities. It's approached as their share of the family's income and given to the child each week or month.
- Allowance is given when kids complete a certain list of chores that states what they need to do and when they need to do it (e.g., make your bed each day, take out the trash on Thursday, wash the dishes on Tuesday night).
- Allowance is earned when kids do a specific chore. The amount of money they earn is directly tied to the work that they do, such as $1 for doing the dishes, $5 for cleaning his room, and $3 for vacuuming the floor.
Whatever system you choose, make sure its rules are clear and consistent. You will want to consider what allowances can be used for, what they cannot be used for, how much, if any, will be saved. Do not forget about donating money to charities. Are there local organizations to which your child or family would like to donate such as one that buys wheelchairs for the disabled or helps people who live with terminal illness? Giving money is a great way for children to learn about helping others selflessly.
As children grow, they become more independent in many ways, including financially. In the tween and teen years, youths have more opportunities to earn money on their own. From household chores to odd jobs for the neighbors, children may be enthusiastic about earning money. They begin desiring what their friends have-the latest electronic device, specific clothing, cell phone, music, etc. This may be the time to expand his or her resources-a visit to the local bank will teach about interest and savings options.
Getting into the habit of depositing earnings into a savings account can help your child build a lifelong way of managing money. It is important that the teenager understand the importance of "earning" their incomes just like Mom and Dad do.
Sources
For kids: Got Money?
A to Z Kidstuff: Money
That Money Show
Show Them the Money
Money Skills for Young Children
Money Skills for Grades 3–6
Money Skills for Grades 7–12
Teaching Children About Money: Ten Principles
Jump$start Coalition for Personal Financial Literacy
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