For many families, talking about money is taboo. The adults make it, the kids ask for it, end of story. Yet financial experts agree that understanding cash, credit, and consumerism is possible, and important, for building a sense of financial responsibility in children. How can you teach your kids about money? What kind of message should you teach them? Let's talk about money.
It's a Good Idea!
Ask your child about what a credit card is and how it works. Tell her it's a way to borrow money, and teach her that, unless you pay it back every month, everything you buy with a credit card is far more expensive than it would be if you paid cash. Model a cash economy yourself. Teach her the discipline of credit cards and you'll be doing her a very big financial favor.
The ABCs of Do-Re-Me
Kids need to know how the economy works. No, not stocks, interest rates, and world markets! I mean the basic ins and outs of a family economy. You can start when your kids are very young by helping them understand the difference between needs and wants, that money comes from working, what money looks like, and that everybody has a job (a kid's job is to learn things, to play, and to participate in the family). As they get older (once they know that a nickel is worth less than a dime, even though it's larger), you can talk with them about credit cards, bank interest, and so on. Kids can learn about budgeting from the time they are about seven. Remember that a solid money education is one of the best tools you can give your kids—it will aid them the rest of their lives.
Ethics Through SharingPart of a solid money education includes teaching your kids that, as a member of a community, as a responsible person, and as a world citizen, they have a responsibility to other people outside themselves and their family. That means sharing. We all live on a small planet together, and we are all linked. Teaching your kids a sense of social ethics includes a sense of charity or giving.
It's a Good Idea!
Steve Otfinoski's book The Kid's Guide to Money: Earning It, Saving It, Spending It, Growing It, Sharing It is unusual for a book on finances for kids in that it stresses the importance of both financial and social responsibility (that's the “sharing it” part of the subtitle). Most similar books have nothing about giving. A loss, if you ask me!
You can help your child develop a sense of social responsibility by:
Setting an example, modeling charity. Some families tithe to a church or temple, others put aside a certain amount of money every year to give to charity or service organization.
Sharing your work specialty with others who can't afford it is another option for people who are knowledge or service “rich” but cash “poor.” Donate your services to a worthy cause of your choice, and bring your kids along with you. They'll learn a valuable lesson as you participate in improving the world.
Volunteer work. People participate in giving programs during the holidays, but don't forget the rest of the year. The nursing homes are filled with amateur entertainers in December, and empty from January through November.
Individual participation. Stress to your child that it's not enough that the family give, that every individual needs to participate, too.
Giving. It's not how much you give. Every little bit helps.
Donating. Kids can donate old clothes, toys, time, or a percentage of their allowance.