Very few parents actually talk with their children about the value of a dollar or how to handle money responsibly. Some schools offer elective classes on financial management, but this subject is not brought up nearly enough in schools today. We can be confident that our kids will gain some exposure to Algebra and geometry, but what do they learn about balancing a checkbook? Ask a 9th grader what an obtuse triangle is and they will probably be quick to answer, but ask them what the term annual percentage rate of interest means and they will most likely give you a blank stare.
Establish a Budget
As a financial counselor, I help adults of all ages get back on track financially, and sometimes they bring their kids along. I am happy to have children in my office as long as they refrain from throwing Lego’s at my head or sneaking under my desk to hit the power button on my computer in the middle of a session. Yeah, that really did happen, but we will save that for another post.
One session in particular, I was counseling a single mother who brought her 8-year old with to the appointment because she couldn’t afford a babysitter. The little girl sat quietly coloring, and I barely noticed she was there until she chimed into the conversation randomly to answer her frustrated mother’s question about why she should have to cut the cable. “Because Mommy, it’s just not in the budget,” she said nonchalantly, and then continued coloring. The child’s mother looked at me, then at her daughter, and then back at me, and we both burst out laughing. “That’s right Baby,” she responded to her daughter, “I suppose premium cable isn’t in the budget. I guess we will have to downsize that package.” This was a good reminder to me that children are always watching and absorbing information like little sponges.
A Lesson Learned
I remember learning that things cost money when I was about 6 years old. I stole a crystal deer from a gift shop at a petting zoo. I really thought that everything in life was free and a store was a place where you simply took what you wanted or needed. I sat in the back seat admiring my new gift and then proceeded to dangle the deer over the passenger seat so my mom and dad could admire them too. My dad turned the car around, and I had to go back into the petting zoo gift shop and return the dangling deer and apologize to the cashier for stealing them. I learned an important lesson that day, and I never took anything out of any stores after that.
The Happy Machine
After learning that things cost money, I observed both of my parents pressing buttons on a machine that dispensed loads of money whenever they needed it. Aha! So that’s where money comes from. I used to call the ATM the “happy machine” and thought it was this magical machine that adults had access to whenever they needed cash to buy something. You can imagine my dismay when my parent’s said no to something I wanted them to buy for me. I just couldn’t understand why they would be so cruel. If they told me they didn’t have the money I would say, “But Mom, why can’t you just go to the happy machine!?”
After I learned that things cost money, I somehow picked up on the idea that having more money was better than having less. My mom recently found a small treasure in the back of her jewelry box. It was a little box full of my baby teeth along with a note I had written years earlier.
The note said:
Dear Tooth Fairy,
Could I please have $2.00 instead of $1.00?
Now why on earth would a seven year old need any money at all? Did I have something in mind that I wanted to spend that $2.00 on? Probably not. I just knew that $2.00 was better than just $1.00. Why did I think that? What experiences had I been through or what conversations had I observed that lead me to believe that having more money was better?
We all form our own money beliefs and these concepts begin forming at a very young age, and whether you realize it or not, how you grew up will impact your financial decisions and how you relate to your money as an adult.
So what money concepts can we start teaching our children as they grow up?
You can start teaching your kids about money as soon as they are old enough to count. When your child asks you for a toy, use it as an opportunity to teach them about setting and achieving goals. If you give an allowance, show them how long it would take them to save up enough money for the toy they want. You could even teach them about how, through saving, they can make money grow, and tell them you will “match” them the amount they choose to save so they are able to meet their goal faster.
Introduce your kids to the value of saving, spending, and giving. When you give your kids an allowance, give them a variety of bills and cents so they can make decisions about how much to save, spend, and give. For example, if you give them $5.00, avoid giving them a $5 bill and instead give them 4 one dollar bills and 4 quarters. Talk through the pros and cons of each option with them, and let them be in charge of the actual decisions. Allow your kids the freedom to make their own mistakes and learn from them. Encourage them to set aside at least one of those dollars to savings and also incorporate “giving” or “charity” as part of healthy financial management.
Make sure you are clear on what your own money values are so you can communicate these to your children. Remember that kids mainly learn through observation. Like little sponges, they are watching and listening to you even when you don’t think they are paying attention. Kids also learn through repetition, so make money discussions and decision making a regular part of your family’s routine, and your kids will thank you for it later.
I encourage you to give LSS a call to learn how your family can take steps to building financial success that will last a lifetime. Our counselors will help you, and your kids, develop a budget and plan of action. Picture yourself debt free! We can help! Give us a call at 888.577.2227 or visit our website at ConquerYourDebt.org for more information.
Author Mary McKeague is a financial counselor at LSS. Want to read more from Mary? Visit our blog, Sense and Centsibility.