I teach an introductory college-level personal finance course. We talk about budgeting, credit cards, credit scores, mortgages, taxes, insurance and so on. The class is an eye-opener for most of my students, and time and time again, they say they wish they had learned these concepts in high school — often before they made major financial mistakes.
With that said, I believe strongly in teaching children about money and personal finance starting from an early age. Most schools don’t do it, so it’s up to parents to take the lead, no matter how qualified (or unqualified) we feel. The good news is, if you start early, you get to begin with the easy stuff.
And what’s the easy stuff, you might be asking? Start talking about money, modeling the behaviors you want your children to pick up. (But for heaven’s sake, if money’s tight, and you’re not sure if you are going to be evicted, your children DO NOT need to hear about that.) I casually work money into our everyday conversations. When we shop, we talk about comparing prices, sales and coupons. We also emphasize “not wasting,” turning off lights, faucets, etc., and discuss how that saves money and helps our planet. Finally, we’ve talked about where money comes from, namely, jobs, and what those jobs buy — a house, groceries, toys. It’s amazing how much children can pick up when you talk to them about money regularly.
Each of our boys has a Money Savvy Piggy Bank, which has four separate slots: spending (for immediate purchases), saving (for more expensive purchases), donating (to church and other charities), and investing (down the road). Since they don’t get an allowance, my husband and I periodically give them change to put in their piggy banks, and they have to put some change in each slot.
When they want a new toy that Mommy and Daddy didn’t budget for, they have to use their own money. As much as possible, I try to give them control over their own purchases. I only step in if it’s a safety issue, and tummy aches from too much candy count as a safety issue. They have to help me count out the money, since we are working on identifying coins and understanding how much they are worth. The boys also help buy presents for their friends. I establish a budget, and they have to find something that fits within the budget.
As for the donating and investing slots, we periodically clear out the “donating” portion and take the change to church, since we want to model good stewardship. And I can imagine a day when we might buy our first stocks, probably companies like Disney that they are familiar with, using the money saved up in “investing.” But that’s definitely a few years down the line. A nearer-term step might be opening an investing account that pays a dividend.
When Cooper starts kindergarten next year, he’ll earn a weekly allowance so he can learn money management. He’ll have the opportunity to earn extra money by doing chores over and above his regular chores. And, at some point, we might talk about other ways he can earn additional cash outside our home. I remember well running a children’s birthday party business with my friend Andrea when I was 11 or 12. We learned a lot about how to price our services, manage expenses, etc.
Are you ready to talk cold, hard cash with your kids? There are some great resources available online:
- BizKids, which airs on some PBS stations, has a wealth of videos, games and other useful tools on its web site. I used BizKids videos when I did a personal finance course for my church’s youth group.
- Practical Money Skills has financial literacy tools for everyone, including a great set of lesson plans for middle/high schoolers. I’ve used these as well when designing coursework.
- The FDIC also has a wonderful Money Smart curriculum for both young adults and adults.
- Shafer…Power! I love watching this family’s journey into entrepreneurship. Check in to see how Paul Shafer and his kids earn some spare change while spending time together and having a blast!