Kids are sponges; they soak up details from their environments more efficiently than most adults could ever imagine. So, it’s not hard to see how children can inadvertently absorb ideas and lessons we don’t mean to teach.
When we vocalize our stress over paying bills, argue with our spouse about money, and complain about how difficult it is to make ends meet these days, we might as well have a textbook in our hand and an apple on our desk.
Maybe it’s time to take a recess and figure out a better strategy for actively teaching our kids about money. In a world filled with financial pitfalls, working to create positive and empowering associations with money early can help set children up for a lifetime of better choices, less stress, and more security.
1. Use Cash Especially for young kids, the concept of credit is a bit abstract. Instead of relying on credit or debit cards for the bulk of your purchases, use cash.
Cash is the currency that most younger folks deal in (at least for a while) and it’s a more visual medium to teach lessons about money. Let your children hold cash, make simple transactions with you, and drop coins in their very own piggy bank. As they mature, you can build on those basic cash concepts and use more representational methods of payment such as credit cards, debit cards, and other paperless transactions.
2. Provide an active allowance. Establishing a consistent allowance that’s earned through basic age-appropriate tasks is perhaps the most fundamental method of teaching kids about personal money management. Actively earning an allowance helps children understand the important links between time, labor, and payment.
But don’t let the lesson end once the money is earned. Allow your kids to manage a portion of their income independently and help them make choices about saving and spending. Over time, they’ll begin to understand spending on a deeper level — as an exchange of time for things. And that lesson sets the stage for exploring more advanced concepts later such as investing, entrepreneurship, and appreciation/depreciation.
3. Give them a piggy bank…with a twist. Few things empower kids more than feeding their own piggy banks. When children have the opportunity to earn their own money, save it, watch it grow, and make choices about what to do with it, the whole arcane world of grown-up finances becomes a bit less mysterious. After all, what better motivator for learning could there be for a kid than having a bit of the green stuff that’s all their own?
But instead of the old-fashioned piggy banks we’re all used to, try a more novel version. The Money Savvy Pig was developed by Susan Beacham, founder of Money Savvy Generation, a website that helps children learn about money.
The Money Savvy Pig is a transparent plastic piggy bank divided into different sections based on how savers want to use their money. There’s a slot for Save, a slot for Spend, one for Donate, and another for Invest.
It’s a simple tweak on a classic idea, but the lesson is a good one — money should be targeted for a specific purpose at the time it’s deposited and successful money management is always driven by some sort of budgeting process. Further, it lets young savers see their money accumulate in each area and better understand the earning/saving/spending/depletion cycle.
At nearly 20 bucks, the Money Savvy Pig is pricey for a piggy bank. If that’s too much, use a cheaper one or none at all. The important thing is to introduce the idea of coupling saving with allocation and budgeting.
4. Be a gamer. Developing a healthy relationship with money begins with understanding it, not fearing it, or being bored by it — and that’s where games come in. Play is an integral part of kids’ lives and it can be a vital tool in helping them build positive associations with money.
Board games like Monopoly, Payday, The Game of Life, Money Bags, and Exact Change teach kids how to count, spend, and handle money. Money Word Games is a free online game where kids learn to solve word problems related to counting change. It teaches simple algebraic concepts and helps kids build basic calculation skills. T. Rowe Price and Disney teamed up to create another free online game, The Great Piggy Bank Adventure, which guides children through various financial lessons with the help of what else? A virtual piggy bank.
5. Participate in family philanthropy. Of course, there’s more to money than earning, spending and saving. Take a holistic approach to the positive power of money and make philanthropy part of your curriculum.
Beyond encouraging children to donate a portion of their income to the charity of their choice, contribute some of your family’s time, energy and talent to those causes closest to your heart. It helps teach kids to spread the wealth in all its forms.
6. Teach by example. Particularly with younger kids, it’s important for parents to actively monitor the messages they’re sending about money.
Constructive lessons don’t involve mom and dad airing and sharing their financial fears and anxiety about money within earshot of young ones. That only teaches money is a source of frustration and personal financial management is a headache. The best teaching methods and moments allow children to establish their own relationship with money through guided exercises and real-world experiences.
With well-delivered, consistent and age-appropriate lessons, it’s easy to demystify money and help your child develop a basic financial awareness that’s grounded in curiosity, responsibility and empowerment. With so many other life lessons hinging on mastering the basics of money, it’s one of the most important subjects parents can cover with their children. And the time to begin is now.