Talking about money with your kids shouldn’t be hard, but many parents put off the conversation due to their lack of confidence in their own financial state. The reality is that many of our high school graduates today are not financially literate, and although finance is not a class offered in your common high school, perhaps it should be considered.
Here are four strategies you can implement now to help your children learn the facts of finance:
1. Encourage Charitableness
Beginning in early childhood, children are able to understand that others may be less fortunate than them. Children are very observant, especially at a young age, and they will begin to make comparisons between themselves and others. Explain to your children that their donation or contribution, although small, may make a big difference in someone else’s life.
- Make a promise to match your child’s charitable donations dollar for dollar (or coin for coin).
- Discuss with your children the different charities, their mission, and then decide on one together to donate to.
- Visit a local animal shelter or nursing home and volunteer to help. The folks there will surely appreciate the extra help.
- Organize a canned food drive or gather food from your own pantry to bring to the local food bank.
2. Delay Gratification
Our millennials are used to getting what they want when they want it, and we have technology to thank for that. Delayed gratification is a very valuable learned skill that will help your child spend smarter, save for their future, and pick long-term investments.
Developing patience in a small child will take time and practice, and it may come with a few tears, but you can also make it fun too.
- Obtain a caterpillar’s cocoon or a few live caterpillars, set up a hatchery and allow your child to witness their transformation to a butterfly. Review the different stages of development with your child so that he or she will better understand the caterpillar’s transformation. Note that this transformation usually takes about a month.
- Alternatively, if your little boy (or girl) is into frogs or you are teaching them about amphibians or life cycles, tadpoles will work just as well as caterpillars, but the transformation from tadpole to froglet to frog will take about 12-16 weeks.
- Plant seeds in a garden, in pots or in mason jars and watch them sprout as the weeks progress.
- Make geodes by growing crystals using eggs, egg dye, craft glue, salt, food coloring and toothpicks in this fun and engaging experiment.
3. Teach Budgeting and Price Comparison Early
Teaching your child early on how to budget their money is a skill that they will use for the rest of their lives. Most young adults have very poor budgeting skills, which lead to them falling into unmanageable debt and not being able to pay their bills.
Teach your child how to make smart buying choices and help them realize the value of money and the quality of products purchased versus the amount the product costs.
How many times have you purchased the cheapest product on the market only to have it break the first time your use it? If only you had bought the higher quality item for just a few dollars more, perhaps you would not be in this pickle. Now not only can you not return the broken item you purchased, but now you must buy another to replace it. This is not a good value.
- When shopping for seeds to plant in your pots or in your garden this spring, have your child compare the price of a packet of seeds and the amount of plants that can come from these seeds and the price of one plant that is already sprouted and ready to be purchased and planted.
- After you have grown your plants, help your child set up a stand to sell his or her plants grown from the seeds you purchased. Alternatively, you can help your child grow the vegetables in a small garden and set up a stand to sell the produce. Get your child to compare the money earned to the amount it cost to purchase the seeds, grow the seeds and harvest the vegetables to sell.
- Bring your child to the local farmer’s market. Encourage your child to support local farmers and local businesses and stress the importance of supporting these individuals when seeking out quality products or produce.
- Visit your favorite bakery or during your next grocery store trip, get your child to pick out his or her favorite dessert. Record the price of this dessert at the store or bakery. Then write down all the ingredients you would need to purchase at the grocery store to recreate this dessert. Compare the price of all the ingredients and the price of the already-made dessert. Also, figure out how many of those desserts you could make using those ingredients in comparison to the price of one pre-made dessert. The results may astonish you!
- Challenge your child to find comparable products (or toys) that are similar in quality, but cost much less than the name-brand product. Example: generic brands or store brands versus name-brands
4. Open a Savings Account Together
Beginning in first grade, students are exposed to lessons about money in school. This is a great age and time to introduce the importance of savings and how savings accounts work. Children ages seven and older are developmentally ready to understand the concept of interest.
- You do not necessarily have to open a savings account at the bank. You can open a savings account at home between you and your child using a good, old-fashioned piggy bank. I recommend a clear, plastic, see-through piggy bank or mason jar so your child can clearly watch their money accumulate and the bank fill up with money they have saved themselves.
- Match your child’s savings dollar for dollar (or coin for coin) to teach the concept of interest. Matching only 1% of your child’s savings (like a traditional savings account) may not be very enticing or motivating, but if you match with 100% interest, your child will begin to see more bang for his or her buck.
- Decide on your child’s motivating factor to save. Is it for your next Disney trip? Is it for a toy or game system they want? Is it a new bike, motorized scooter or even a used car? Perhaps your child likes shoes or clothes and they are eyeing a pair of expensive shoes that you are not willing to spend your own money on at the moment. Whatever their motivation, hone in on it. Post pictures of it around your house to remind your child of their commitment to save.
- If you have a teen, I do recommend going to the bank with them to open their first checking and savings account. It was probably one of the best money lessons my parents taught me as a teen and it’s effective. By doing this, your teen will be able to see his or her allowance (or paycheck) deposited directly into their account so they can visualize how much money they have for the entire month (or until the next time they get paid). Help your teen figure out how much they should budget for expenses (gas, car insurance, cell phone) so that they do not overspend.
- Encourage your teen to take care of expenses first and explain to them the consequences of defaulting on payments to creditors. If your teen overspends after expenses are taken care of and asks you for money to go out with friends, resist the urge to give in and instead serve them with a little tough love. It will not take long before they “get it.”
*This post contains affiliate links. For more information, please see my disclosures page here.
Want to make your financial lessons fun? Play these entertaining games with your children to help bring the money management message home in a fun, engaging way.
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