Teaching Children What Money is All About
Most kids have no conception of money. And why should they? Mom or Dad whips out the credit card or debit card to pay for groceries, writes a check to pay the car payment, and goes online to pay the mortgage. When cash is required it means a trip to the ATM machine and then as if by magic twenty dollar bills come out. There’s no connection between Dad or Mom being at work, getting paid and then using that pay to support the family.
The first step in teaching children about money is to get them to understand the concept of cash. Setting an example is one of the easier ways to do that. The next time a purchase is made when the children are around, pay cash. It will take some planning ahead. It defeats the purpose to use the ATM in front of the child. Going grocery shopping? Use cash.
When taking the children clothes shopping set a goal of spending a certain amount, say $100 with the objective of purchasing 4 outfits, such as 2 pairs of jeans, 2 pairs of pants, 2 long sleeved shirts, and 2 short sleeved shirts. Tally what you’ve spent so far and when the $100 limit is reached that’s it. Don’t be surprised if your child tells you to use your credit card to make up the difference. They’ll be shocked to see how quickly the $100 goes. They also may be surprised to see how much of their hundred dollar budget is eaten up with logoed items or designer clothing.
The second step is demonstrating that using a debit card or writing a check is spending your own money. The accounts don’t replenish themselves. Set up a savings account for your child. Use birthday gift money, allowances, or money they earn doing chores. It’s an extra step but take the child with you and have him or her make the deposit. Check the deposit slip and show the child that the cash is now in their account. When the child sees something they want, tell them they can use their own money to pay for it. Eventually the concept of the money they have in their account determines how much they can spend will start to dawn.
Electronic banking, debit and credit cards have made it easier to keep finances in order. Adults know that their paycheck determines their budget. Most of them know that it’s not possible to spend more than they earn on a regular basis without digging themselves deep in debt. Children need to learn these same rules at an early age to become fiscally responsible adults themselves.
