Helping Your Children Understand Money

Teaching Your Children About Money

One day while I played dress-up, I had decided that I needed to go to the "store", so wearing one of Mom's white tee shirts, a scarf, and my mom's tennis shoes, I grabbed her purse and proceeded to put my play food in a little basket. I ended up dropping the purse, and since it was my mom's, it was fairly full and several things fell out. I started to pick them up and found mom's checkbook.

When I grabbed it, I saw that in the checkbook mom had a register just like the one that she used to teach me to add and subtract, so I asked her what it was for. I knew that she already knew how to add and subtract, so I didn't see why she had one. So she told me that she used it to pay bills. Then I asked the question that all parents seem to dread: Why? "Well", she said, "because we used the services the company offered and we had to pay them for it." Being confused, I asked why again.

Seeing that I wasn't going to let the topic go, mom sat me down at the table and went through her checkbook with me. She showed me what her paycheck was, then she went down the list: Electric Company so that we could turn on the lights, watch TV., and have the air conditioner in the summer; Gas Company so that we could cook our food and heat the house in the winter; House and Car payments, plus insurance; Gas for the car; Doctor bill; etc; etc. I remember getting scared at that point because I didn't know if mom made enough to cover everything. So she showed me her math and explained that not every bill was due to be paid at the same time, so I was less scared.

Then I asked her what I could do to help, which surprised her greatly. So she explained that if I and my brother would turn off lights and the TV when we didn't need them or weren't using them, it would save money. She also explained that to save money was why we only used the AC (a window unit) to cool the living room and bedrooms, and why we wore sweaters in the winter to help us stay warm. Then with a big hug and kiss, she sent me back to my room to finish cleaning the mess I had made while she started to make supper. After I was done and went to help her, I made sure to turn off the light! ;)

So the lessons I learned from my mom?

• Fake/old unused checks and registers are great toys for kids and can help them learn math and writing skills. Just make sure you cover any addresses or account numbers if using real/old checks.

• Kids love to learn, which is why they asked the dreaded question: Why? Heaven knows how often I have wanted to pull out my hair and all I've done is baby-sit.

• Kids learn better when their lessons are applied to their lives. When a child asks why he/she can't have something, explain the whole reason, and don't just say, "Because I said no." At the very least, tell them you will explain it better when you get home then keep your word.

• Kids love to help. Whether it is planting and growing a garden, or fixing and repainting a piece of furniture, helping is how they learn and develop skills. And they love to learn how things are connected to each other, like how one plant can produce enough fruit that have seeds in them, to make more plants. And how saving seeds to plant next year saves money as well as produces yummy food.

• Kids are smart, much smarter then many people give them credit for. While some might think it is a bad idea to expose kids to money matters early, as it applies to their household, so long as they are reassured that their needs are being met, they then learn which things are truly "needs" and which are "want-to-haves". Encourage the child to express themselves and their feelings and thoughts while talking about such things.

• Kids are creative and can come up with some really good ideas to help the household when given the chance and really listened too. I remember asking my mom if we could turn off the AC at night and open windows during the summer when it was cooler out, so we tried it and it worked pretty well.

• And last but not least: It takes a household and everyone living in it to work together, if anything is to work at all.

By Krystal from Newton, IA

Fiscally Responsible Parenting

Let Them Spend

If your eight-year-old daughter receives $100 from her grandparents, allow her to spend $25. Help her to make a wise spending decision, but let it be her decision. She might opt for the toy she didn't receive at the holiday, or she might head to the movies. It's her choice. Feel free to save another $25 for spending on the family vacation or later in the year. Either way, you're teaching her to save half of her money.

Open an Account

The benefits of the account aren't monetary. It's a safe house for the money, and it will allow your child to see the money accumulate. The small amount of interest earned won't impress anyone other than your child.

CD or Savings Bond?

Savings bonds seem to be an antiquated way to save, but right now they're earning more interest than CDs. Pay attention to the penalties for early withdrawal and watch your rates. You can cash out bonds in a few years if CDs offer a better return. While the bond won't give it's advertised rate (most are purchased for half of the amount that they carry when mature) it will give more than the original investment. However, for extremely young children, these long standing savings are easy and guaranteed. Antiquated or not, they still work.

Cash for College

By Kelly Ann Butterbaugh

Watch the Pennies and the Dollars

By Bobbie G from Rockwall, TX

Budgeting for Adolescents

$5 Gift That Helps Teach a Child About Money

Teach Children About Money With a Weekly Allowance

Teaching Children the Value of a Dollar

What's Washington Worth?

Another way to teach value is to teach a limit. For every new toy, an old toy must be donated, or he/she may only choose one thing to purchase at the store. This will help children to learn that there are limits; we run out of money; we run out of space. We also need to help them to become aware of the value they hold on items. This helps in the long term when spending limits come into question, and it helps short term when children feel the need to have everything in sight; something taught by commercials.

Teaching Cost

The easiest way to do this is to take children to the store and let them take an active role in buying the family's groceries. Try playing a game at home which takes items from around the home and labels them with appropriate costs. Then, hand out play money to your children and have them "buy" what they can. Even some of their video games teach how to buy items with money accrued through gaming; use this interest to your advantage and make a lesson out of it.

Another way to teach the lesson of cost is to give your children allowances. If my son goes to the store with an aunt or grandparent, I send two or three dollars with him. He's limited to spending only his money. Quickly he has learned that he can't afford everything, he can be satisfied with something small, and that he can buy three smaller items for his money rather than one larger item. He's slowly learning the value of those three dollars.

Make Smart Consumers

Rounding is an important consumer mathematical skill. Children see an item marked $2.99 and think of it as costing $2 rather than $3. Explain this concept early; always round up. Think of the big picture. A TV that costs $499 is a $500 TV; that's a big difference from $400.

It's a long road to smart consumerism, but it's a ten year journey. Hopefully the destination is worth the trip.

By Kelly Ann Butterbaugh

Teaching Kids About Finances

1. Pay your child for work done. This helps them prepare for the time when they will be in the work force. We pay each child an allowance but it has to be earned by completing their chore list. We set age appropriate chores and realistic expectations. For example each child has to maintain a clean room. Additional chores such as walking and brushing the dog, emptying the garbage and laundry, etc. are divided up according to skill/age. Chores are to be completed by 10 am on Saturday morning and then allowances are paid. Chores not done? Sorry, no pay check. Gee, just like a real job. Additional or seasonal items are paid by the job (cleaning the basement, picking up sticks on the property, etc.)
2. Help them to tithe or give charitably. We require our children to give 10% of their allowance to their church just like the adults. They have their own giving envelopes and perform this ritual weekly. It's just a good habit.
3. Each child has their own saving account established at about age 2 or 3 and are required to save 50% of any money earned over and above their allowance (job such as caring for the neighbors cat or babysitting OR in the event they get a REAL job they are use to paying themselves FIRST!) As their expenses increase their percentage of this drops to 10% so they can afford to pay their bills.
4. and YES! They do have bills. Allowing them to purchasing clothing over and beyond their clothing allowance (my oldest daughter wants a COACH purse) or their car insurance, eating out, manicures, etc and a portion of prom expenses helps them build healthy boundaries and is a great dose of financial reality. Before we set up this system we were constantly nagged by the whine of "BUY ME THIS..." Now they know they can have it--eventually.
5. Set up a checking account before they are in high school. We deposit their clothing allowance and school fees into their checking accounts. They have to spend wisely, write checks and balance the checkbook. It is amazing how a shirt from TARGET suffices when they are spending their OWN money when before only a HOLLISTER shirt would do.
6. Additional allowance tips: I include enough money to pay for SOME of their social activities. This way they have to decide what to spend their money on. Our 10 year old earns $5 per week and the 16 year old earns $15.
7. Talk openly with your children about finances. Review the insurance bill, the grocery bill and the electric bill with them as appropriate Having an understanding that these items don't come cheap is invaluable as a young adult.
8. Have them read Dave Ramsey (and write a book report). We plan on paying $50 when this task is completed and feel it is a wise investment in their financial future.

By Diana from Prospect, KY