(Photo credit: Amble Design/Shuttestock)
By Iva-Marie Palmer
When you ask parents what their kids know about money, you hear a lot of the same things: the belief that credit cards mean you can buy anything, the idea that ATMs print money, that age-old clich? that money grows on trees.
And why shouldn?t money be mystifying to kids? It?s not always easy for adults to explain it to themselves?and many families don?t talk about it at all.
It doesn?t have to be that way. Here are some strategies employed by parents?and advocated by experts?for teaching kids at every age and stage how to be money-smart.
At this age, you?re not explaining revolving credit or mutual funds. Usually, lessons are pretty simple: save, earn and learn. ?
A penny saved is a penny earned. David Gutierrez?s son, James, now 3 years old, saves in a piggy bank and gets excited to see his change add up?almost $30 in a few years. Karen Powell says her 6-year-old son Beau began saving his monetary gifts early on. She now teaches him to use it to buy gifts for others, making for a two-fold lesson about saving and giving.
Use an app. Entertaining, educational resources are also key. Theresa Langhaar said her 6-year-old daughter learns a lot through the Money Mammals app, especially when it comes to her $6 a week allowance. ?We have three jars set up on her dresser?spend smart, save, share,? explained Langhaar. ?Predetermined amounts?$3/$2/$1?of her $6 per week go into each jar, so the savings becomes ‘automatic’ in a way.?
Allow an allowance. Spencer Smith says his daughter Alice, now 7 years old, has for several years earned a few dollars a week for appointed chores?and is docked in quarters when they?re not done. She also can negotiate extra money for odd jobs, to teach fair value. But her earnings are all to be saved and she needs to get parental buy-in for whatever she?s buying, whether it?s a trip for ice cream or something larger, like a coveted Lego set.
Read up. Picture books, like Lemonade in Winter by Emily Jenkins, teach about money decisions and also age-appropriate counting and adding.
In grade school, it helps to sync your financial lessons with their math lessons?and to leverage every kid?s desire to play adult.
Take ?em shopping. Children as young as 6 or 7 can begin to understand the grocery bill, writes Ron Lieber, a New York Times columnist who covers families and finance. He advocates having children help shop so they can learn the difference between needs and wants, as well as pricing things in the store. Kids can even help cut coupons and be allowed to keep the change.
Balance ?the checkbook.? Stephanie Strobridge, now an adult, remembers that at age 9 her parents gave her a ?checkbook.? Because she liked to play store, her mom would allot a certain amount of ?budget? for the store and then give Stephanie receipts to enter into her checkbook, both as a way to practice her math, but also to keep track of how quickly money got spent on essentials like electricity, water, rent and supplies.
Strobridge said it felt fun at the time, but, ?as an adult who has to do this, I don’t know why I found it fun.?
Explain trade-offs. According to Lieber, grade school is a good time to talk about trade-offs: Skipping takeout means money in the vacation fund, for example. If you have a coffee-a-day habit, or the like, expect your kids to bring this up.
By middle school, kids are ready for the reality check. Where does all your money go each month? How much does something cost in man-hours?
Show ?em the money. Given the pervasiveness of electronic transactions and online banking, money lessons aren?t always tangible. In the ether, money might seem infinite; in the form of cold hard cash, not so much.
By middle school, if not earlier, kids should be exposed to this visual lesson: Carole Shawarko, now mom to a baby, said she remembers her own mother laying out all the money from her paycheck on the table, in cash. ?After we all said, ?Wow, that’s so much money,? she would start removing money for bills,? Shawarko explained. Her mother would take some for rent, some for car insurance, and so on. ?By the time she was done, we would see what was left in the pile?not very much. Then she would say, ?So, when you ask for something, and I say we can’t afford it, this is why.?? Lieber, of the New York Times, also advocates for this approach.
Make them earn it. Samantha Sugar said that for her older girls, ages 10 and 12, the family breaks down what they want into how many hours of work at minimum wage it would take someone to work to be able to buy it. ?If they say it’s only $50, we translate that to work. Then we turn that into X number of hours spent cleaning your room, scooping dog poop, etc.,? she said. ?It doesn’t necessarily change anything but at least they know how hard people have to work for things.?
If you?ve been fairly open about money matters all along, you might have something close to a fiscally-knowledgeable teenager. If so, congrats, since the teen years are rife with both temptations to spend and the need to be down and dirty about what?s realistic (college tuition, anyone?).
On-the-job training. Obviously, the fastest way for teens to grasp the concept of earning money is through a part-time or summer job, which illustrates not only the responsibility of work but things like post-tax take-home pay. This is also a good time to reinforce the concept of ?paying yourself first.? Every year seems to bring the alarming statistic of how many Americans lack savings: In June 2016, it was 66 million without any emergency fund, according to a Bankrate.com survey. ?
To college? and beyond. Then, it?s really a matter of continuing the conversation: Parents should engage their college-bound students in discussions about student loans and job prospects for their chosen field. Whether you?re on the well-off or struggling side of the spectrum, Lieber writes that clarity and seizing opportunities for discussion, rather than stifling them, make all the difference.