Teaching Kids About Money

Teaching Kids About Money and Financial Values

I became interested in the topic of how to raise kids who are smart about money while I was a classroom teacher. I even created a mathematics unit I used with my fifth and sixth grade students I called “teaching kids about money” and it was well received by my kids, their families, and the administrators at my school.

Are you raising kids who are smart about money? According to a survey done by Edelman Financial Engines eighty-nine percent of parents of young children feel it is extremely important that their kids grow up with good financial habits and ninety-one percent agree they should be the ones teaching their children these habits. But half of parents (49 percent) say they don’t know how to discuss money in ways they think their kids would understand and one in four parents (25 percent) never or almost never talk to their kids about household finances. The problem is particularly acute during periods of economic and stock market turmoil.

Much of what goes on in the home depends upon how we were raised as children. I grew up in poverty, raised by a single mother and keenly aware of my circumstances from a young age. My mother used to talk about “people with money” as though they were from a galaxy far, far away. By the time I was about twelve years old I had come to the conclusion that the only way I could become on of those people was to go to college and have a career. I daydreamed about living in a beautiful home and having material possessions that would make my life more meaningful.

It seems like we like to get as far away from the way our parents taught us about money as we can when we become parents. But how do our values and beliefs change if we have only our past to learn from?

During my first semester of college I was offered a credit card. This is a common practice and usually not discussed with parents at the time. It was 1973 and when I received my BankAmericard (the predecessor of VISA), issued by the Bank of America in California I was over the moon with pride and joy. But along with my elation came the harsh reality of credit card debt and high interest rates. My credit limit for this card began at two hundred dollars, was quickly raised to five hundred, and within six months I had a bill each month that I soon figured out amounted to paying exorbitant prices for items I could have paid for in cash at the time.

As a classroom teacher of students mostly from homes where English was not spoken fluently and where finances were handled with cash and money orders it was my goal to teach some of the basics of money, finance, and values to level the playing field. Once a week I invited my families to join me after school where I showed them what I was teaching their children about checking and savings accounts and more. For two years this was a part of what I did and I enjoyed it immensely. When I moved on to another school my mathematics unit on teaching kids about money was left behind and practically forgotten. Now I have written a bestselling book on this topic – “Kids and Money: Teaching Financial Responsibility and Values to the Child in Your Life” and I am proud to be sharing this information to children and adults alike.

As a parent and grandparent I look for ways to model financial values and habits, always attempting to strike a balance and offering guidance without being to pushy or overbearing with my beliefs or stressing anyone out about family finances.

Teaching Kids About Money Must Begin at a Young Age

There are so many opportunities to work money and finance into the conversation with the children in your life. It can begin before they enter school by discussing the cost of food and toys or by sharing your thoughts on giving an allowance (something I vehemently oppose for many reasons). Practices from friends and neighbors provide excellent examples of what works and what doesn’t. Over the decades my family has used these as real life case studies we have all learned from and that have shaped our opinions and actions as a result.

As an entrepreneur I teach the concept of “know your numbers to achieve financial success; no numbers leads to disastrous results.” Teaching kids about money at least a decade before they enter the work force or start a business will have a positive impact on what they are able to achieve as young adults and throughout their lives.

Your ongoing conversation with the children in your life can be a journey of learning and discovery with age-appropriate lessons, activities, and experiences. Earning money, saving money, and investing money are all pieces of the game of life that have different connotations and outcomes. Learning about compound interest when I finally emptied my piggy bank and started a savings account at age twelve definitely made an impression upon my young made and allowed me to dream of my future in a more hopeful way.

Learning About Money Teaches Discipline and Trade-Offs

If your child wants new toys or a bicycle or designer clothes, for example, you can discuss the idea of having to pick and choose which is affordable right now and what must be saved up for over time. As a child I was concerned with housing and understood at some point that renting an apartment was different from owning a home for various reasons. Some of those were around money and others were more about pride of ownership and long term commitment. Lifestyle changes had to be made to go from one to the other and many people are not willing to do that. Understanding what you can have at this moment versus what you will be able to have in the future can be eye-opening for children and adults alike.

Teaching Kids About Money Does Not Mean Worrying About Finances

Many families are concerned that having these conversation will unduly lead to sadness, depression, and obsessive thoughts around the topic of money and finances. While we do not want our children preoccupied with thoughts of where the money will come from to live life each day, we also do not want to raise kids who are not smart about money and oblivious to its place in our society. Striking a balance is crucial and that will vary from child to child at different stages of their lives. Talk about the cost of certain items, such as food and gasoline so they are aware of what to look for every day as they go through life.

Your child may also want to contribute to the family’s household expenses as they get older, This can be an excellent way to enrich your conversation about money and give them a voice in what is possible. Both boys and girls will benefit from contributing the the household budget at times. This is when a conversation about the pay gap in the workplace that still exists could be a valuable topic of discussion.

I like the idea of dividing financial resources into three piles; money for long-term plans and goals, money to be used for something in six months or so, and money to spend right now. I learned this concept as a young adult and still use it to this day. I believe it helps with a healthy attitude and habit towards the money we earn, save, and invest and helps us to determine financial values and priorities along our life journey.

Teaching Kids About Money So They Will Have What We Did Not

Once we become a parent we understand the concept of wanting more for the kids in our life than we had while growing up. It’s important to look at the bigger picture of teaching and guiding children to make their own decisions in regards to money and finance and striking a balance between our past beliefs and experiences and the reality of the moment in front of us. It can be done and the process is a learning experience for everyone involved. In the blink of an eye the toddler is crying in the toy store for a toy they cannot live without and then choosing a college and career path based on what they love rather than what they can afford. It’s those fifteen or so years in between these two events that requires us as experienced adults and caring family members that will make this transition a positive one.

Please take a look at my popular book “Kids and Money: Teaching Financial Values and Responsibility to the Child in Your Life” as a reference and guide for this important part of life. This book is now being included in various programs around the country dedicated to financial education for young people. Available in both the Kindle edition and in paperback.