It’s Called Currency

How do you teach your children about money? It’s an especially tough question when what you learned as a child left you totally unprepared for life in the adult world. And it leads to many more questions… At what point do you tackle which questions? What bad habits do you have from your own childhood that you want to make sure they don’t learn? What’s the right way to go about this?

To help figure out what might be an “age appropriate” money topic, look at what they’re learning in school. You know they’ve got to get the basics of counting and addition and subtraction before basic money lessons about prices and saving for purchases will really stick. As multiplication and division come into the picture, you can begin to work with the concepts of interest and paying over time. Even before they can actually calculate compound interest, they should be exposed to the idea so that they will want to understand how to do the math.

Children should be exposed to the processes of basic daily money management at home. If you’re not deliberately and with careful forethought teaching your children, then they’re learning on their own, simply by watching you and the TV. Are those lessons—the ones you don’t actually think about—the ones you really want them to learn?

If you’re currently avoiding talking about money in front of the children, you’re doing them (and yourself) a huge disservice. Money is a fundamental part of our daily lives, and you cannot leave that part out and then expect your children to figure it out on their own later. Talk about your budget, the things you’re saving for, the money you owe and why. If money discussions always seem to end up in an argument between parents, then only one parent at a time should talk with the child(ren) about money matters, and that parent had better be ready to answer questions about the fighting. (If the kids don’t ask, you should explain anyway, or they will just grow up thinking that money is something you have to fight over.)

How much should I give my child for their allowance (or weekly commissions)? Most experts recommend that children get $1 per year of age for an allowance. Easy enough: your 8-year-old gets $8 and his 14-year-old sister gets $14. But what did they do in exchange for that money? And what do they learn from the exchange? Match the requirements and lessons to their ages and to situations they may encounter in the real world. For instance, paychecks are earned and allowances can be as well. You receive a base salary for a base level of expected work; overtime is earned for extra work. These concepts can easily be applied when giving allowances: basic age-appropriate chores must be completed before the base allowance is paid. (More leniency is given for younger children, but teens must meet the baseline or they simply don’t get the money.) Opportunities for earning extra money can be added, such as help with spring cleaning or holiday preparations.

It is not necessary to tie a dollar amount to every chore. It is necessary to help your children understand that no one gets money for nothing in the real world. Even those folks who win the lottery had to buy their ticket, and some have spent thousands on tickets before they pull in a jackpot, large or small.

There are hundreds of websites out there with information—good and bad—on how and what to teach your children. Do some research and make sure that all the basics are covered. Above all, make sure that you teach them how and why to save. That lesson has been lost recently, and we as a nation are suffering because of it. Debt is no substitute for saving, but is frequently marketed like it is. “Credit” is not “cash” and you cannot borrow your way out of a hole. Make sure your children understand that and they will have a good foundation for building a strong financial future for themselves.

Some sites to check out:

• Teaching Children Money Habits for Life – from the University of Minnesota Extension’s Children and Money series; includes “How are you doing?” checklist and developmental charts
• GiveMe20.com – from a credit union service organization; focuses on teens and saving and provides information on credit as well as saving and some excellent calculators

Tags: education, marketing, priorities, saving // Add Comment »