Teaching Children about Money

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The economy and money are a hot topic this time of year. With a presidential elections just behind us and a natural disaster coming every few months. Talk of money and spending is everywhere leading to some difficult conversations. The most difficult is with your kids. How do you explain the current economy to a five year old? Go ask your teacher will not suffice at this point. But there are a few tips and tricks to having a well rounded financially sound little gal or guy.

The conversation should start early as a learning experience with fun and games. No big charts and numbers.You don’t want to add a level of stress to something that could possibly mold a little mind to either embrace or shun an understanding of financial topics.

Start with dollars and cents and then once the math level of your child grows so too should your teaching of money and financial matters. With addition and subtraction budgets can be introduced, not on a company or even household scale but on a smaller level of course. Squirrels saving acorns for winter is a great starting point. An example could be: A squirrel eats 2 acorns a month for the winter, if winter lasts for 4 months how many acorns does the squirrel need to find in the fall to be nice a full all winter long? Start out with a cute drawing of a squirrel and a tree, please note these can be print outs and not hand drawn. Maybe some cotton to represent snow and the coming cold. Also two handfuls of acorns from the yard to figure out the math part. Make sure to go with examples a kid can see, hear, eat or feel. Bringing one or more senses together helps drive the topic home in a special way. Touching real acorns and counting by hand will help out big time. Also using something which is edible could help too. like marshmallows instead of acorns. Get creative and have fun!

As kids grow up so do does the conversation. Now including allowances and spending habits. Maybe incentives for smart saving and frugality. Example: Instead of spending $5 a week on candy, if you save up $50 in your piggy bank in 10 weeks you can get a brand new video game, BUT if you save up your money for 10 weeks and instead of buying the shiny new game, buy used games then you could probably get two older games for the same price. The incentive isn’t more money or bigger payouts but more reality driven examples of savings and spending. Another example could be: Which is more useful- spending $20 to see a movie on a Saturday night, or spending $10 on a movie on a Tuesday night?

The conversation never stops, but evolves into talks about economies, investing and market volatility. Situations where money can grow without you doing anything but also knowledge of investments going down the tubes. Be honest and teach both sides, otherwise there is not a reality based understanding but a candy coated to doom glazed understanding which helps no one.

With some creativity and persistence no longer will you have a “give me more” child, you will have a child who is more aware of financial topis as well as how to save a penny. The world is becoming odder and odder everyday but there will always be a few constants those including love and money. Love is difficult to explain, but money, that is simple by comparison.