Each year I supplement my grandchildren’s financial education with a one week day camp I call Grandma Rie’s Money Camp. This year I am spending several days in July preparing for that one week of camp in August. I will research concepts to teach, find games, movies and books to teach the concepts, plan each camp day to include activities and learning experiences and pull together all of the resources into a week long camp – which will hopefully be fun and educational for both kids. I spend quite a bit of time on this, because I think it is important and because I enjoy planning it. But, what if you don’t have the time or resources to do the same?
How to teach children about money.
Here are my suggestions on how to teach about money – especially how to teach young children about money. These are things my spouse and I did – almost without forethought – and certainly without a great deal of money or concentrated time.
The trick (in my opinion) is to develop and present a focused message – that you maintain consistently from babyhood through childhood through teen years, young adulthood and yes even into their adult years. The delivery and complexity of the message changes over time, but the message itself is consistent. The message conveys the knowledge and tools to deal with money and finances but more importantly, it also conveys your own values and matches your financial and life goals. Each adult within the household or family is expected to convey that consistent message to the children.
Once you have this, every day and every activity can present opportunities to teach the message – even if you are not aware that you are teaching. Monkey see, monkey do!
Teach them the money mechanics.
Help them learn how to count it, what the value of currency and coin is, how it is used by your family and society. Teach them how and where to save it, give it and spend it, when to use it for needs vs. wants, how to make it grow and etc. Make sure they understand the different forms money can take such as cash, checks, credit, debit, electronic, and barter.
As they grow older, make sure they understand the economic principles behind it, the laws that govern it, the people that have careers concerning it – such as brokers, traders, and accountants, etc. Share with them how to deal with all of these people and why they might want to do so.
Talk about and demonstrate your money values each and every day or week.
Help them learn that you feel it is important (for instance) to not freeload, to earn your own way. Help them learn that you feel (for instance) that is is beneficial to share with others less fortunate or give to a cause you (or they) feel is significant. Help them to learn how to get the proper value for their money and, how they can avoid the ‘bad’ guys who try to scam money from people.
Teach and show them that money can grow by itself, or get used up needlessly.
Help them understand that money can earn interest, or that things money buys can grow in value. Contrast the use of money earning interest with money spent on wasteful items and let them make their own mistakes early in life – being sure your child can see that it was a mistake and showing them a better way. Let them discover (over and over) the value of compound interest. Create charts showing how much x grows at y% in z years. Pay them interest on their money, teach them about stocks, bonds and mutual funds. Show them the value of a business – especially one with passive income.
Make money available to them through their own efforts.
Whether it be through an allowance, saving up birthday or Christmas gifts, or by helping them find jobs to do for pay or small businesses they can run – make sure that your child has access to money. Once they do, use their money to teach them about saving, spending and giving. But let them decide how to allocate their money – it is their money and making decisions and living with the consequences of those decisions is one of the very best ways anyone can learn anything!
Help them find an institution to store their money and help it grow – at first that will be a piggy bank at home where you might pay interest on what they save, then perhaps a savings account at a local bank, later perhaps an account at an online bank or mutual fund. Expose them to the institutions, laws and processes used by our society to handle money.
Help them learn how to shop wisely and to learn how to delay their gratification. Watch and review advertisements with them. Demonstrate and teach that social pressure by peers (yours and theirs) should not determine how they spend money.
Show them how to track income and expenses and budget for needed or desired items.
Start by using teaching moments at the grocery or toy store. Show them the price, have them compare price and features, show them how to do more research. Demonstrate that you plan your purchases by having them help you draw up your grocery list. Show them how your household budget works by sharing bill paying and expense planning and tracking activities with them.
Help them learn how to be an entrepreneur.
Encourage and teach them to set up a kid business. They will learn by doing – about cash flow, income, expenses, advertising, marketing, packaging, quality, customer satisfaction, responsibility and all kinds of business concepts that will come in handy for them as adults.
Show them the business model for those who are lenders.
Let them see that the lender is in business to make a profit and that when they get a loan, they are the one that is supplying that profit. Help them understand that credit is just a tool but one that must be used wisely. You have to teach kids that credit cards are NOT free money and to handle them with care.
Be open to discussing personal finances with them at age appropriate levels.
It has been said that money is the last taboo subject. Don’t let it be that at your house. Have frequent family discussions where kids feel safe and free to learn about their money and yes, even about your money.
My kids do a great job of teaching my grandchildren – about all things, including money. But it never hurts to have help as long as you are all pulling in the same direction, with the same message.
Disclaimer: I have used or experienced each of these money teaching ideas and have done well with them BUT I’m not a teacher or a financial adviser or any other professional (other than a project management professional) – so use what works for you.
What did your parents do to teach you about money and finances? Are you doing the same, or something different with your children?