Recently, More4kids did an interview with an author who writes books on teaching children, particularly teenagers about money. You can read the interview here the interview on teaching kids about money with Randy Loren. I have to say that I learned a lot, I also learned a few things that I was doing wrong and a few things that I was doing correctly. While I don’t want to take away from the interview I do want to offer you a few tips on how to make sure that your child understands the value of money.
Tip One: Pay Them an Allowance
I know that there are a number of parents out there that give their children an allowance. Note that my tip is to pay them an allowance. I say pay because they need to understand that money has to be earned, it isn’t just given to you because you are cute. You can start paying an allowance when kids are 3 and 4. Trust me when I tell you they understand that money is a good thing. So pick one thing that they can do each day to get paid for. It can be making sure all of their crayons are put away neatly in the box. Just make sure the money is tied to a task.
Tip Two: Teach them Savings
You would be surprised at the number of kids these days that do not know what a piggy bank is. It can be an empty coffee container with a slit cut into the top. Teach your kids that saving is important. Start when they are young. In our house, our children are made to split their money into three equal parts. A third they are to save, a third they can spend on whatever they want and the final third is to be donated to a charity or organization that they feel needs the money. Our son donates to the Nets for Africa because it is important to him that kids don’t die, and our oldest daughter donates money to different animal shelters because that is where her passion is.
Tip Three: Talk to Them about Money
My husband and I made the mistake of not telling our kids when money was tight. Kids don’t understand the cost of living. That electricity costs money, that food costs money and that the roof over their head costs money. No you don’t have to tell them how much each bill is and let them know whether or not you are able to pay your bills on time, but they need to understand that there is a price associated to everything that they have in their life.
Tip Four: Stick With the Program
If you started the allowance and the saving program when they were young did you stick with it? If not, get back in the habit. When they get money make them save part of it. It is important for their long term goals to save money.
Tip Five: Teach them That They Can’t Have It All
We are guilty of this; we give our kids a lot. The reason is that both my husband and I came from poor families. We both swore that we would never let our kids think we were poor. No, they don’t get everything that they want, but they do get a lot. Now that they are getting older, our oldest two are 14 and 11, we are teaching them that mom and dad aren’t going to buy everything anymore and that they need to use their money for some of the things they want. Our son wants an XBOX, which is something that my husband and I refuse to buy. If that is what he wants, he has to save the money for it. But then he also wants Nintendo DS games. So he gets money and the money he has to spend he goes and spends on the games. His answer then is that, “But I have this other money in savings.” Well that money isn’t for a big toy that is money for college. He has to save his spending money to buy the XBOX.
As far as the savings for college, the reason that we make them save for college along with what we have been putting away for them is this. I learned long ago that kids, and adults, care far more about something when they have a personal vested interest in it. If they are putting their hard earned money towards college, my hope is that they will take their studies seriously. I’ll let you know in a couple of years if it worked.
Tip Six: Create a Family Budget
Your kids don’t need to know every nickel and dime that you spend and where it goes. BUT, if you are going on a family vacation and there are certain places that they want to go or certain things they want to do on vacation, create a budget that shows them the cuts that need to be made to make sure that everything can be paid for on vacation. This budget can include giving up the big channel package on the tele for the next few months. Create it together so that they can see how managing money is important to getting what they want.
Tip Seven: Teach Them Value
There is value to everything that we do and that we buy. Teach your children how to determine if what they are investing their money into is worth it. That maybe if they save a few more dollars they can invest in something that is going to be a little better, last a little longer. Our son loves the Dollar Store. Yes, the Dollar Store is great for some things… but toys… I would rather that he take $5 and go to a Toy Store and buy a GI Joe there instead of the army guy at the Dollar Store that is going to fall apart the first time he plays with it.
Teaching our kids about money is one of the most important jobs we as parents have. If you need help coming up with ways to teach your kids you can refer to the book by Randy Loren, Climbing the Money Mountain.