Making kids money savvy

2011-05-21 10:17

I recently had a very interesting conversation with my six-year-old, who wanted to know if we were poor.

My husband was between jobs and we had to cut back, which included some extramurals at school. We explained to our children that dad wasn’t earning money at the moment, so we had to be careful with our money.

My youngest was also concerned that whenever he wanted a toy from the shops I said: “We don’t have the money for that.” For my six-year-old, this meant we were poor.

So I sat down and explained how our family finances worked. Even though dad did not bring in a salary for few months, we had some money saved up and although we had to be careful with our money, it did not mean we were poor.

We also save money each month so that mom and dad will be able to stop working one day when we are older – like granny.

“So why don’t we have money for toys?” he asked. I took some tokens from a board game to use as “money”. I showed him a pile that represented my income. I took a few tokens for day-to-day stuff like paying for the house, food, clothes, petrol and some treats like going to a movie.

I showed him that some of the tokens from my income were used to add to our pile of money for when we were older or if we don’t have a job and, finally, some tokens were then used to save for family holidays and presents (he was very interested in the size of this pile).

“So when I say that we don’t have money for toys, I mean that this little pile for our everyday shopping has run out. I don’t want to take money from the pile that we are saving for important things”.

He then came up with a question I didn’t even know six-year-olds knew about: “What if you get sick and you can’t work, or you are in an accident?” I explained about insurance and that it would pay us money every month if we
couldn’t work.

He then asked to see the “piles of money”. So I went to my office and took out all my statements – my bank statements, money market and investment statements, and even our insurance policies. Just seeing the numbers seemed to impress him – especially the bank statement that had lots and lots of numbers (he doesn’t get credit and
debit yet).

What I learnt is that children understand the concept of money from a young age, and it is never too early to start showing them how finances work.

By discussing our finances, my son felt more secure knowing that our finances were being taken care of. The best thing we can do for our children is to start teaching them about money. And that usually starts with our own finances.

Learn about money yourself
How can we teach our kids sound financial behaviour if we’re living on plastic and don’t have any savings ourselves?
Children learn from example. Start by educating yourself on budgeting, cutting costs, saving, reducing debt. If you’re in financial trouble, get help. Nobody is born knowing how to manage money. It’s all about what you’re taught and what your core beliefs are, many of which stem from childhood. Having your own finances in order is the best gift you can give to your child.

Have a family meeting about the household budget
Teach the children what income is and what expenses are. Explain to them what costs money – rent, electricity, food. This will help them understand where money goes each month, and why. If there is money left over, discuss what should be done with it. Should it be saved for a rainy day? Should it be spent on something the family needs?

Explain one principle at a time and let the kids ask questions. They will surprise you. Try not to use negative words like “we don’t have money for that”, rather say “that is something we can save up for”.

Over holiday periods, create a budget on a board in your kitchen. Allocate money for the holiday and discuss how it should be spent. Each day, record how much has been spent and how much is left. This can be a really fun way to show your children how to budget.

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