When I was younger, my grandparents used to sit down with my brother and me after Thanksgiving dinner. Page by page, we’d go through the big toy catalog that had arrived a few days earlier. I think they could’ve saved themselves some time by circling nearly everything in the boys’ section.
I was very naïve about the value of money as a child, but this need not be the case with your children. Here are our tips for providing age-appropriate financial advice as your children grow.
Grocery Store Shopping
You can probably start teaching your children the value of money around age 6 or 7. This is when your child will start learning to recognize and add together different denominations of money in school.
Your grocery bill might be a good place to start, according to an article in the New York Times. Since children have specific requests at the grocery store, you can begin to show them how much certain things cost in comparison to others. For example, you could explain that you get more cereal for less cost if you go with the store brand instead of the name-brand marshmallow cereal. You can explain to the child that the savings you get here will buy an extra box of vanilla cream-filled cakes. (I suppose my fantasy childhood was very unhealthy.) The grocery example is a good one because it uses concrete terms to show exactly how far your dollars go, rather than forcing your child to wrap his or her mind around the abstract concept of a budget.
You can use play money in order to show them how much is set aside for groceries, the house payment and other bills. Then you can show them how much you spend on sports, going to the movies and going out to dinner. If you can show how much is left after everything is paid, it will have the dual effect of showing your child where the money goes, as well as setting realistic expectations.
Let’s face it. Kids are more and more attracted to their electronic devices. I know that sometimes you might like them to get outside and get a little fresh air, but you can use their infatuation to your advantage.
Many websites offer educational games like these to give kids a chance to have fun while learning. When your kids get a little older, there are simulation games that let them run everything from amusement parks to railroads to sports franchises. This gives them a good training on how to budget based on income.
An allowance might be another great way to teach your kids the value of a dollar. Let’s say you pay your kids an allowance for completing their chores. You can make this function as a simulation of the wage system: They’re being paid to get their work done.
This also teaches them about the power of saving and goal setting if they have some big toy they want to purchase.
If you wanted to take the wage thing a step further, you could match a certain amount of their savings in the way an employer might with your 401(k). (Okay, maybe I’m just lobbying on behalf of the children of America at this point. It’s worth a shot.)
You might also decide to split the allowance. You can give them a certain amount to use on whatever they want and have the rest set aside for charitable contributions or college savings.
When they get older, you might show your children the actual amounts you’ve saved for college. You can pick a local college and show them what that money will buy in terms of books and credit hours.
As your child begins to prepare applications, it’s important to sit down and have a very frank budget discussion. If your child applies for federal student aid, they have to sign the forms and see your income anyway. You might as well take the opportunity to discuss constraints with them.
This doesn’t have to be a scary thing. Your child might work harder to pursue scholarships once they see how much college really costs. It might also inspire them to take their prerequisites at community college in order to save money and not come out with a mountain of loan debt. They could pick up a job and start squirreling away the savings.
Do you have any ideas for other parents looking to teach their kids about money? Share them in the comments section.
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