I vividly remember watching my father accept change from a cash transaction when I was a child, and trying to figure out exactly how it was fair that he had handed over a $10 bill and received two $1 bills (and our lunch) in exchange. I couldn’t have been more than four or five at the time, and although we were at the zoo, my attempts to understand how money worked is much more memorable to me than any of the animals we must have seen that day. That teachable moment was one of several unforgettable experiences in my childhood financial education.
Now that I am a parent, I am thinking more concretely about how to pass on that education. Money is not a subject taught in school. It’s considered taboo to talk about money, and often people will have a sense of shame about it. On top of that, we live in a “Gotta Have It NOW!” culture where credit is easy to come by. Parents absolutely must educate their children about sound finances, but many simply do not know how.
Teaching Your Children About Money
Unfortunately, a single discussion about money is not going to cut it when giving your children the financial life skills they will need as adults. The most effective way of teaching your children is by talking money all the time. Here are some common occasions for regular financial discussions:
At the Grocery Store
From weighing produce and determining what the cost will be, to keeping track of coupons, to comparing name vs. store brand, to keeping a running total throughout the trip, the grocery store provides you with a wonderful opportunity for your child to hone his math, money, and budgeting skills. Making a game of the grocery store with younger children by challenging them to find a cheaper alternative or add up prices quickly will make the financial education fun. For older kids and teenagers, allowing them to take the list to see if they can spend less than budgeted (without sacrificing any of the needs on the list) will inspire them to be savvy shoppers—particularly if you let them keep the difference between what they spent and what you budgeted.
When Paying Bills
The monthly bill-paying chore is hardly anything you would call fun. But when kids are small and want to do everything Mom and Dad do, it’s an ideal time to teach children about money. Allow children to see how much money you have and how much must go out to pay bills. Let them practice their addition and subtraction skills to help you balance your checkbook. If you still pay bills by check, put the kids in charge of double-checking that you have all the necessary information in the envelope before they seal it and stamp it and put it in the mailbox. Explain how the things your kids might take for granted—like heat and electricity and, of course, cable—cost money each month.
Even the most budget-averse family generally goes on vacation with only a certain amount of money they can spend. Involve your children in the decisions even before you’re on the boardwalk debating between the hot dog vendor or the pizza parlor. Saving for a vacation is a fun way to teach children about the power of savings goals. If children understand that giving up something now leads to something wonderful later, they will learn the valuable tool of delayed gratification. With only a certain amount to spend, including children on the planning process of your vacation will help them to learn how to budget and how to rank the importance of different options. Once you are enjoying yourselves on vacation, giving each child a certain amount to spend while away is an allowance lesson compressed into a week.
It may seem strange or uncomfortable to include your children in your day-to-day money decisions, but the only alternative is leaving them unprepared for their financial future. By making money something you talk about openly and with fun and humor, you will ensure that your children have all the tools necessary to make good money decisions.