Do your kids think money magically sprouts from ATM machines? Do they believe that a piece of plastic is all you need at the drive thru window to buy a chicken sandwich?
If my boys had their way, we would go to Toys-R-Us every Saturday and buy a new set of LEGOS. Unfortunately — or fortunately, depending on your viewpoint — weekly trips to the toy store are not a line item in our family budget. And when we go, there is a limit on how much money I’m willing and able to spend.
Teaching your children about the concept of money is an important part of parenting. So, how exactly do you explain the concept of money to your kids?
There are plenty of opportunities to talk to you kids about money — from trips to the grocery store, to a visit to your neighborhood bank, to the drive thru of your favorite Chick-fil-A restaurant. And depending on your child’s age and level of maturity, the conversation will be different every time.
Here are some examples:
When discussing weekend plans:
When your kids suggest fun activities for the weekend, talk to them about how much the activities will cost. Odds are, you’re the one footing the bill, so use the opportunity to talk about how fun activities need to be prioritized because there isn’t an unlimited amount of money to cover trips to the movies, shopping, or other outings.
When it’s not a need, but a want:
Do your kids know the difference between a need and a want? Are your kids brand conscience?
The fact is, everybody has to make financial choices and sacrifices. The sooner your children understand that, the sooner they’ll become skilled at using money to cover their needs, and saving it up to satisfy their wants. When you do splurge on a purchase, made it clear that this is a special experience.
When talking about their future:
Discuss how you picked your career, and what you do at work–and then ask your child what she might like to be when she’s older. Talk to her about her favorite subjects in school and what types of careers she might pursue based on her interests.
For older kids, this is a great opportunity to talk about what kind of college degree may be required for the profession, how much getting the degree can cost, who will pay for it, and the need to save for it in advance.
When making big purchases:
Take your children shopping and talk about prices. When your child wants to buy a large or expensive item, plan together how much money he’ll need to save from weekly allowance or gifts. You may also choose to offer ways he can earn more money by doing chores. Remember to monitor the progress regularly, as the savings grow and the goal comes within reach.
Children as young as three can start receiving an allowance, and with that allowance comes the idea of budgeting and saving. One of my favorite teaching tools is Dave Ramsey’s Financial Peace Junior.
When talking about extracurricular activities:
When talking about extra activities like soccer, dance, karate, piano lessons and others, talk with your kids about the cost of each. Help them understand that all of these add up to a lot of money, so they can help you save by only doing the ones they enjoy.
Here are some questions to start the conversation:
- What do you think is a lot of money?
- If you had to pay for yourself, how much money do you need to live?
- What happens when you spend more money than you have?
- What is credit?
- What is debt?
- When people spend money, what should they spend it on first?
- Why is it said that the love of money is the root of all evil?
- Why should people give some of their money away to help others?
- What should you do if you want something but don’t have enough money to get it?
- Is there one thing you would really like to buy and how long do you think it would take to save for it?
- Would you rather have $100 or spend the day doing whatever you want? Why?
The best time to start money conversations is when your kids begin to notice what things cost, usually in the first or second grade. By taking advantage of these opportunities, you can raise more financially savvy kids.