Parent's Guide to Financial Literacy: Part 1
As a certified financial counselor, I started teaching my son about money as soon as I could. As a 6-year-old, he could quickly add up a handful of change.
He knows what money is, but when I took a graduate course on family systems I asked myself: "Does he really know money? Understand its real value? Have the foundation for a lifelong, healthy relationship with it?" It might just be fancy paper and metal on the outside, but this will be the longest "relationship" he ever has, so it's best to get him ready now!
After some academic research and lots of chats with parents, here are five tips to help make sure your child’s lifetime with money will have a "happily ever after."
your child to experience money.
Never giving your child the opportunity to handle money means they are missing out on valuable learning experiences. Something as simple as giving your preschooler the cash to pay for their ice-cream truck purchase helps them see that you trade money for goods.
give free money.
This might sound contradictory to my first post, but there is a method to all this money madness. Giving your child a set allowance each week doesn’t teach them the intrinsic value of money. Simply being handed money doesn’t set them up for the future when they actually have to work for it.
for opportunities to earn money.
All children should pitch in to help out the household without financial gain, and each family will have their own expectations. So while you might expect your daughter to do her homework every night and feed the family cat, think about other opportunities that might allow her to work in return for spending money. How about mopping the kitchen floor? Raking up leaves?
Come up with a list, put a financial value for each item and allow your child the opportunity to develop a work ethic. Chances are, they are going to be a little more careful about blowing the money on something they don’t really want.
your child purchase some of their needs and wants.
Nothing teaches saving like allowing your child the opportunity to buy their own things. Let them know that this year they are buying their own small holiday presents for family or, if they really want that new scooter, they can save for it.
Little ones can do this, too.
We went to Disneyland last year and since my boys weren’t earning their own cash yet, I created "Disney Bucks." Each day, they received one "Disney Buck" for a medium toy and two "Disney Bucks" for two treats (at the checkout counter, I prepped the cashier to take the ticket while slipping them cash for the register). This got rid of the endless bombarding of "Can I have this? Can I have that? Please?!" every time we walked past a store or snack cart.
It was amazing how conservative they became with their spending and were really thinking through their purchases. My son decided against a Mickey Mouse ice-cream because he knew he would want a churro later and only had one buck left.
are no money failures for kids.
Last fall, I had a great idea. My sons had read a book about children earning money from a lemonade stand (yes, I throw entrepreneurship at them from all angles!) and wanted to create their own. What a great opportunity, I thought, for them to shop for their supplies, set a price, prepare the drink and set up shop.
Nobody came! I actually ended up running a stranger down on the street, handed them a dollar and asked them to buy lemonade because my boys were so discouraged. They earned enough money to cover the cost of making their lemonade and netted zero. Why am I talking about this? Because while they didn’t earn the money they wanted, they did learn an important life lesson about cost, supply and demand.
Stay tuned for five more tips in my next blog. And do share how you teach your kids about financial literacy!