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Teaching kids about money before they get an allowance
Asha Dornfest of Parent Hacks | October 28th, 2008 - 6:42 PM
Did you hear? The United States is in economic crisis, and much of it has to do with credit. That is, buying stuff with someone else’s money hoping you can pay it back later. Which sounds a lot like what my nine year-old son tries to do with me: “Pleeeeeease can you buy me Super Mario Giganto Turbo Supernova III: The Adventure Continues? I’ve got the money! I’ll pay you back!”
Um, no. In fact, my saying no is part of an important financial lesson: you can only buy something if you can pay for it. In this case, I meant it literally — he needs to bring his wallet along if he wants to buy something. But it also applies to the notion of saving one’s money for future purchases.
It’s just one lesson along the way to my son’s understanding of the fundamentals of money management. It’s more important than ever for kids to learn how to make money, how to save it, and when (and on what) to spend it.
But how do you teach your kids about money when they’re not yet ready for an allowance? There are plenty of things you can do that don’t involve giving your kid a dime. Once they’re old enough for an allowance, they’ll already have plenty of money smarts under their belts.
Here are a few ideas to get you and your kids talking and thinking about money:
- Play “store.”
- Stack and sort coins. Talk about two nickels being worth the same amount as one dime.
- Talk about “wanting” versus “needing.”
- Point out TV commercials and magazine advertising. What are they trying to do?
- Use forays to the grocery store to show your child how to comparison shop, why brand names cost more than store brands, and how companies use cartoons and characters to capture their attention and interest.
- Browse mail order catalogs and talk about why certain toys are more expensive than others. Are they worth the money? How important is quality versus price?
- Take them to a second-hand store and show them the price difference between new and used.
- Read books about kids in different financial circumstances. Charlie and the Chocolate Factory teaches incredible lessons about poverty, gratitude, greed, integrity, and whether more money actually makes you happier.
- Expose your kids to life in other countries so they can see how differently other children live. (While an extended vacation would be lovely, books may be a more realistic place to start. One option: Families: Around the World, One Kid at a Time.)
- Most importantly, talk to your kids about your own families’ values when it comes to money. Do you have an entrepreneurial bent? Are you frugal? How do you choose to spend and save your money?
Another great place to start: the fantastic Preschool Money Manager Kit from The Tessy & Tab Reading Club.
What about you? How have you introduced your kids to money basics?
Love to see that you mentioned travel and imaginary travel through books in here as an important lesson for children. Love it!
Thank you, Nicole! For me, travel, more than anything else, has taught me about needs vs. wants. I can’t wait to take my kids to India (where much of my family’s from) so they can learn the same lessons firsthand.
I like your ideas - especially the difference between ‘wanting’ and ‘needing’.
I’m curious what others think about donating used toys vs. selling them. Is that a bad or good idea to teach kids about being ‘resourceful’?
I think there’s a happy medium on the donate vs. sell question — do a little of both. Both contain great lessons for your kids.
Excellent post. I’ve been trying to teach my kids a little about W vs N, and a LOT about viewing what they see on TV critically. Specifically ads, but even some of the content (as in: “do you think that’s really as fun as they make it out to be?” and “what are they trying to make you do and why?” ans: make money for themselves).
Amazing thing about money. My three-year old has very little sense of its use, but is drawn to it (coins) and will hold it in his hand and put it in and out of his little bank. The best
was when he put a loonie in the cd player of the car. “Where’s the dollar?” I asked. “In dere”. Fascinating.
Seriously: there are a lot of good ideas here. Bookmarking
Ice Cream Day at preschool was a good lesson for us in budgeting.
We said he could have $3 and be able to get the Spiderman ice cream, but then he wouldn’t have any left for a treat on our Saturday morning grocery trip. The first week, he chose to spend all $3 at daycare. We stuck to our guns about no treat at the grocery store. Each Ice Cream Day thereafter, he chose to save a dollar so he could choose another treat later on.
We got some looks from teachers when the overheard us remind our four year old about his choice, but he’s learned his budgeting lesson very well.
I use money banks. Not just one piggy bank they can put all their money into only to break open and spend when it is full. Rather, a set of 3 banks divided into “save”, “give”, and “spend”. Whenever they get gift money or an allowance (when they were little they only got 3 quarters and they didn’t understand it all but they got into the habit of always dividing their money), they divide it into 3 and place the money in separate boxes. The money in the “save” box goes directly to the bank once they’ve reached a certain amount (ie. an amount that seemed justified for a trip to the bank). The “give” box is what they use when they want to buy a gift, give to a charity, or bless a sibling for just the sake of generosity. The “spend” box is just for them. They can choose to use it little by little, splurge all at once (can be a good lesson in this alone-ie. have to wait to make more before spending anything). OR, what I recommend is that they have a goal (i.e. $20 toy) and save up for it. What a great lesson there! Whenever I talk about my banks, adults ask if I have any available for them because they need help budgeting this as well!
I actually have these 3 tiered banks available for anyone interested. http://www.mothersfriendsos.com.
Similar to the Tessy and Tab kit, Dave Ramsey has a Financial Peace Jr. kit for kids 3 - 12.
http://www.daveramsey.com/shop/Financial_Peace_Jr__P112C87.cfm
My mom matched any money we put into savings. I built up a significant amount by the time I went to college, but even better had developed healthy saving habits.
Check out my blog on simple living, budgeting, and parenting at http://www.JustPlainJoy.blogspot.com
we started out rewarding helpful acts with a handful of coins from the change jar…….when we noticed each child’s “productivity” was reliable they started getting an official allowance on the contingency that there chore got when asked, without griping. They get paid weekly, and the dollar amount is based on their age. They get half of their age (5 yr old gets 2.50, 8 yr old gets 4, etc).