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?
By Krystal from Newton, IA
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.
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.
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.
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.
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.
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 Diana from Prospect, KY
It is so easy to spoil our children and miss the opportunity to teach them about saving, choices and sacrifice. It is important for children to understand the value of money. What are some ideas you have for teaching this important lesson?
Very good advice. Remember when raising a child, you are raising them to one day be able to take care of themselves. They grow up fast.