In today’s tough economy, discussing money is generally uncomfortable, even painful. To some, this topic also comes across as gauche. The truth, however, is that as with many uncomfortable topics, the more you know about how to handle money, the more secure you feel. This is especially true in relation to children, who may not understand every facet of financial planning and wise handling of money, but who need to learn as soon as possible. Here are six basic money-related conversations to have with your kids at various ages.
What Money is and How it Works
Starting in about first or second grade, most teachers start building math lessons around money. Yet, the presence of a good teacher doesn’t mean you should leave these lessons entirely up to school. Let your young children watch while you count out change or small bills in public. Start teaching them essential coin values and tender denominations before the school does, to give them a leg up. Explain that money is exchanged for the things we need or want, and have them practice this exchange. For example, allow them to take their allowance to a local dollar or discount shop to buy a toy or other object, and then supervise their interaction with the cashier.
“Need” vs. “Want”
This one’s tricky, because if you ask any young child from preschool to elementary or even middle school age, he or she will swear that the latest toy, clothing item, or iTunes card is a need. In an age-appropriate manner, explain what is truly a “need”: food, clothing (reasonably priced, comfortable clothing that fits), shelter, and so forth. Emphasize what “reasonably priced” means, and give examples. For instance, a poorly made jacket hanging in a store, priced at over $50, is not reasonable because of the lack of quality. Don’t be militant; treats are okay once in awhile. However, teach your kids that, “Do I need this?” is always a good question.
How to Save Money
Many banks and other financial institutions encourage young people to set up accounts, or at least start saving in a piggy bank, as early as possible. You can get in on this as well. As soon as your child is old enough to meaningfully help with chores, institute an allowance. One to two dollars is appropriate for a five- to six-year-old; $3.50-$4.00 for an eight-year-old, and $5.00 for ten and up, with increases possible from there. You and your child can work together to decide what portion of his or her allowance should be saved, spent, or set aside for special reasons, like church offerings or a charity your family gives to. It’s also not a bad idea to help your child choose a fairly expensive item he or she wants down the road as an incentive to save. For example, if your child is a reader and wants to buy more than one book at a time on trips to the bookstore, help her learn what 2-3 of her favorite paperbacks cost in real life, and help her set aside the cash.
“Tight” Does Not Mean “Poor”
Kids notice when their parents seem worried about the family’s financial situation. In our current culture, where many parents are laid off or have their hours cut regularly, this is even more prevalent. Such events can cause kids to worry that they are one step from losing their home or worse. Young kids especially have a hard time separating real life from worst-case scenarios they see on TV or in books. Therefore, you and your spouse must be vigilant. Keep financial discussions as private as you can, but be honest and reassuring. You can say, “Yes, Mom (or Dad) has lost their job, but we will be okay. We have money saved, and we will make sure you are taken care of.” If you actually are in financial trouble, emphasize that you’re going to get help, and that no one will snatch your home from under you. At an age-appropriate level, you can familiarize your kids with any counseling you’re using such as Paddon & Yorke Inc, In Charge Debt Solutions, or Care One Credit Counseling.
Avoiding Debt and Collectors
This conversation is one in which you need to lead more by example than anything, particularly around teenagers and young adults. If your kids see you maxing out credit cards or buying things you can’t afford, they will absorb the idea this is okay. Explain that money is a bit like calories. Just as you don’t want to eat more than you burn, you can’t spend more than you take home and expect long-term good results. Discourage the use of credit cards for young adults and suggest debit card use instead. Pay with cash when and where you can. If you must make a purchase that will take time to pay off, teach your children what it means to pay in installments or pay interest. As a bonus, this is a great time to work on math skills by using percentages, principal interest, and other formulas.
Paying it Forward
The presence of money often alerts kids to the fact that there are people out there who don’t have as much as they do or need help. That observation is a wonderful excuse to teach kids to give back. Decide as a family on a charity or a church-sponsored project you can contribute to. Make a habit of boxing up good quality used items, such as clothing, books, and toys, to give to Goodwill or even better, to neighbors or friends. Do not disparage the homeless or financially strapped; instead, explain that these people likely fell on hard times, and emphasize ways you can help. An example might be a regular family appearance at a shelter or soup kitchen.
Money is a sticky subject for everybody, especially kids. In fact, some children may be afraid to talk about money because of what they’ve seen and heard others go through. However, with tips like these, you can make money less intimidating and help raise a financially responsible family.
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