Teach Kids About Money

As kids grow, they tend to become more thoughtful about money, and it's a process to teach them how to save more, shop wisely and earn money through small jobs. The current economic troubles provide a fitting time to school our kids on personal finance, according to Eric Tyson, author of Personal Finance for Dummies. If you're feeling guilty because you can't buy your child that video game system he desperately wants for Christmas, or you're asking him to choose between playing recreation basketball or taking karate lessons this winter, Eric Tyson has one word for you. Don't. In fact, he says, now is the perfect time to teach your kids some valuable financial lessons and learn that budgeting is how the world really works.

Steps

 * 1) Expose your kids to the realities. "Kids are surprisingly aware of what's going on in the world," says Tyson. "And if they don't know that times are a little bit tough and Mom & Dad are having to watch their spending, it's time to tell them. Sheltering kids from financial realities does them no favors." A good grasp of personal finance is one of the most valuable life skills a person can have. And while previous generations may have been raised with the constant admonishment that "money doesn't grow on trees!" too many of today's parents neglect that lesson. It's time to change that—and the economic crisis we're in now provides a great incentive for doing so.
 * 2) Tell kids the truth. Kids are perceptive. If you've been acting anxious and on edge lately, they've noticed. Rather than let them wonder why Mom and Dad are working so much lately or constantly talking about money, explain (on their level) what's going on in the family's financial world. This might mean explaining why vacations have to be cut back, why there will be fewer toys under the tree etc.
 * 3) Explain to them how much things cost. Some parents are surprised to find out that their kids don't have a very good grasp on what things cost because they have been sheltering them from this always. A great hands-on way to open their eyes is to take them on a "money tour" around the house. For example, kids might not understand that hot water costs more than cold water, or that bumping up the heat results in higher power bills. This exercise will teach them how they can conserve and thus help the family save money. You can also pile up all of the bills for the month and have them look at the amount on each one. Show them what the family's cost of living is and again reiterate the areas where they can play a part in reducing the costs.
 * 4) Realize that kids learn what they live. It may sound like common sense, but you—Mom and Dad—are your kids' most influential teachers. When you ring up a barge-load of credit card debt, take out exorbitant mortgages or car loans, and fail to save anything, that's what your kids come to see as normal. If you are modeling unhealthy financial habits, you can't realistically expect your kids to "do as I say, not as I do."
 * 5) Deprogram them. Kids are constantly bombarded with information about expensive things, whether it's the fancy sports car they like, the wardrobe of their favorite athlete or actor or the many appeals to luxury in the 40,000 commercials that the American Academy of Pediatrics estimates the average American child sees each year. What they aren't bombarded with is knowledge on how to manage money effectively. And while schools are increasingly incorporating money issues into the existing curriculum, the broader concepts of personal financial management still aren't taught. Frightening though it may be, some schools rely on free "educational" makes it all the more appropriate for older kids to "help out" by getting a part-time job—especially to fund unnecessary purchases like DVDs or cool clothing.

Tips

 * More time comes out of less spending. You have to be more creative and more involved with one another when money flow slows or stops; and you have to team up to do things together a lot more. This is a positive and something to keep being grateful for.


 * Allowing children partial exposure to various ads (print or television) may more adequately prepare them for life in our consumer culture. When paired with adult or mentor coaching about the purpose of ads and ways to cope with the inherent disappointments of living on a budget this can prepare children for a lifetime of advertisement bombardment.

Things You'll Need

 * Time to sit down and talk
 * Budget
 * Savings account

Related

 * How to Talk to Your Children About a Financial Crisis
 * How to Save Money by Sharing Clothes (Teens)
 * How to Have Good Financial Manners (for Teens)
 * How to Take a Healthy Approach to Finances in Your Relationship
 * How to Discuss Finances With a Teen

Sources and Citations

 * Sharon Harvey Rosenberg, 11 Ways to Teach Kids About Money. Shared under a Creative Commons 2.5 license.

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