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When was the last time you talked to your kids about money? What do they know about earning, spending, saving, and investing?
If you have not talked to your children about money, or explained to them the concepts of earning money, managing money, or paying a myriad of bills with your money, they may think you have an unlimited quantity of financial resources.
Money does not grow on trees. It does not magically fall out of an ATM. It does not appear in your account like magic fairy dust every time you need more of it.
It is an asset that can take years to earn and seconds to lose.
Money misconceptions arise partly from the fact that many money transactions are digital (e.g., direct deposit, auto bill pay, credit and debit cards).
Misconceptions also arise because families don’t talk about money. Even teenagers may find it hard to understand why you can’t buy them everything they want.
Most primary and secondary schools don’t teach financial literacy.
Banks don’t offer you a money management class when you make your first deposit.
Employers may provide workshops about retirement investments, but these workshops are usually optional, and most people work years before they attend one.
Given all of these challenges, name three ways you expect your child to learn about money.
Who is in the best position to teach your children? You guessed it. You.
Give your children the gift of knowledge. Teach them what they need to know.
Tips for Teaching Your Children About Money
1. Put Money in Clear Jars
Use clear jars of different sizes to teach your child about quantity, time, and goals.
Ask your child how many coins it would take to fill up each jar. Fill each jar and write down how many coins fit it the jar.
If your child is learning to count, you can use one coin denomination (e.g., only put pennies in the jars). Then, count the number of coins in each jar.
If your child is older, use different coin denominations. Then, count the total amount of money in each jar.
The goal is to show your child that bigger jars require more coins.
Set a timer to discover how long it takes to fill each jar. Set the timer. Fill one jar. Then write down the amount of time it took to fill the jar.
Keep setting the timer and filling the jars until you have written down all the times. Which jar did your child fill the fastest?
You can turn your jar filling task into a race to see who can fill each jar the quickest.
For a fast, frantically fun race, put coins in the jar by the handful; there is no limit on how many coins can go in the jar at the same time.
For a slower, steadier race, set a rule that racers can only put one coin in the jar at a time. For an additional challenge, add that anyone who puts more than one coin in the jar at a time has to empty their jar and start over.
You may want to designate someone as the money referee for your races.
Whether your race is fast or slow, the goal is to show your child that bigger jars take longer to fill.
Quantity and time are great ways to teach your children about savings goals. It takes more money and more time to save for a bigger goal.
Consider turning your clear jars into savings jars. Each jar can represent a different savings goal. Small goals have little jars and big goals have large jars.
How long will it take to reach the smallest goal? How long will it take to reach the biggest goal?
Write your child’s goal on each jar, or put a picture of the desired item on the jar.
2. Make It a Game
If you want to mix things up, turn your clear jar money activity into a game. Before counting the coins, ask your child to guess the number of coins or the amount of money that is in each jar.
Offer a prize for the right answer or the closest answer. The prize could be the money in the jar, a percentage of the money in the jar, or another amount of money based on how close your child’s answer is to the right answer.
Have fun with the game. Add dollar bills to the jar, ask other family members to make guesses, or contribute the winning prize money to your child’s savings account or savings goal.
You can even let them put the money in the jars and have you guess the amounts. What fun prize can you get for guessing the right answer?
Get creative and make the money jar game fun for your child.
3. Create a Visual Timeline
Make money visual for your child. Create a money timeline or design a money calendar.
Each time your child has a money event (e.g., receives money), write a note on the timeline or calendar.
Use stickers and drawings to add color and visual interest to your money work of art.
If you are creating a timeline, use strips of paper for each money event that happens in your child’s life. As you add events, tape the strips of paper together and fold them like an accordion. At the end of each month, the end of the year, or when your child has reached a savings milestone, unfold the strips of paper and discuss the money timeline with your child.
To add dimensionality to your timeline, use narrow strips of paper for small money events and wide strips of paper for large events. Encourage your child to use different colors of paper and different types of stickers for each money event.
The visual timeline serves as a way to help your child track financial goals. It also makes your child’s money events visible, which reinforces the principles of quantity, time, and goals.
4. Take Your Child Shopping With You
To be clear, taking your child shopping with you really means take them shopping and let them spend their own money. Show them that the things they want and need are not free.
Physically going to a store and handing a cashier their money will make the concepts of spending, saving, and earning more real.
Before going to the store, take a picture of your child’s clear money jar. Let your child take some money out of the jar. Write down the amount of the deduction. Then, take another picture of the jar. The pictures serve as visual records of deducting money from the jar.
For younger children, you may want to add the pictures to their money timeline. Even if they aren’t great at counting yet, younger children will be able to tell you that there is less money in the jar.
For older children, consider keeping a ledger (i.e., balance sheet) of how much money they add and deduct from the jars. Use the ledger to mimic keeping track of an account balance at a bank.
If your child has a bank account, debit card, or savings account, have them check their account balance before they make the purchase. Ask them to check their balance again after they make the purchase.
By shopping with your child, and letting them spend their own money, you are teaching them about debits and balances.
You are also teaching them how to manage their money in real time.
5. Do Math While You Shop
While shopping in the store, or browsing online, do math with your child.
If they want a new toy or a pair of shoes, ask them how much money they have, how long it took to save the money, how long it would take to afford the item they want, and how long it would take them to refill their jar or account after they buy their toy or shoes.
If your child decides to buy the item, that’s fine. If they decide not to buy the item, that’s fine too.
The point of this exercise is not to discourage your child from buying the item they want. The goal is to help them think about money and money management.
As an additional benefit of doing the math and asking questions, you and your child will become more comfortable talking to each other about money.
The money math discussion encourages you and your child to ask important money questions.
It also lets your child know it is necessary to think about what they want, reflect on their spending habits, and plan for how they will reach their financial goals.
6. Talk About Needs vs Wants
Now that you and your child have discussed money and enjoyed some money racing games, it is time to talk about needs versus wants.
Explain to your child that there are things they need to survive (e.g., food, water, shelter) and things that they want but do not need to survive (e.g., video games, toys, expensive clothes).
For younger children, start simply. Ask them about items around the house. Ask if it each item is something your family needs or something your family wants. Start with obvious things.
For example, does your child need 10 dolls or 20 toy trucks? Do they need the breakfast you made this morning? Don’t be surprised if your child says they need at least some of those toys.
If talking about your child’s belongings doesn’t encourage them to distinguish between needs vs wants, ask them about something you or your family owns.
For example, does your family need 20 place settings for a family of 4? Do you need 6 winter coats? Does your family need a house to live in?
Keep asking questions and providing explanations until your child understands needs vs wants.
For older children, let them help you make decisions about what to buy based on your budget, your family’s needs, and your family’s wants.
Ask them if your family really needs the item. Then ask if there is a way to get that item at a discount or on sale.
Let your child know that it is okay to get what they want, but first, they have to get what they need.
Distinguishing between needs and wants is a money management strategy. Teach your children to prioritize their needs over their wants.
Developing healthy financial habits takes time. Set your children on the right path by teaching them about money.
Provide your children with the tools they need to build a healthy financial future.
Become economically savvy. Read Economically Savvy: Your Personal Guide to Wealth and Financial Wellness.