How to Kick Start the Money Smart In Our Children
Part 2: Ways to Guide a Child to Financial Maturity and Security!
If you have a passion to increase your children’s financial intelligence DNA, then I am sure that you read the previous two blogs “Money Smart Kids Essay Contest” and “How Can I Teach My Children About Money”. If you missed them, please take a few minutes to go back and read them to catch up or to just refresh your memory. As you follow along, the most important thing to remember is that it is very important for everyone to learn about financial literacy very early on in life.
In this blog we will continue with the series on Ways to Guide a Child to Financial Maturity and Security!
Now that the children know how to count money and understand the worth of our currency, and we, as adults, have adjusted our behaviors to show a more positive demeanor when paying bills, it is important for us to understand that our role in educating the children about how to count money, how to use money and how we feel about money is really just beginning.
Constant communication is the door and the key to developing Money Smart children. From the moment those cute little apples fell off the tree, and discovered that a quarter bought a piece of bubble gum out the machine, you have been bombarded with a set of sentences that start off with three words, “I want some …” or “Can I have …”. If this is a part of their dialect, then it is certainly time to start teaching them more about money.
Here are some suggestions that you can use:
Start teaching them about the difference between wants and needs.
A cool way to do this is to give them another alternative to whatever their request is. For example, when in a checkout line of a grocery store and you get the question “can I have some candy?” You may try the response “sure you can – but we won’t be able to buy the snacks that you already have next time”. With your answer, you may get one or two responses from them like, “Why” or “OK”.
Now is your chance to teach and communicate.
Take this opportunity to talk about the difference between a “WANT” and a “NEED” and how what we want is usually not what we really need – but that everyone has to make choices about spending their money on fun things or on the things they really need. Let them know that in this case they have a choice to make and when warranted, let the decision be theirs. As the parent, you have to be prepared for the choice they make and allow them to make it. Sometimes it’s going to be difficult to accept their choice and stick to the agreement. But if you become weak and waiver from the agreement, the children will miss the lesson.
Once they start to understand the lesson over time, you can now introduce to them the concept of saving for what they want or need.
Realistically, it is not important that they actually save up the total amount that is necessary to cover their purchase, after all they don’t have a job yet, but it is important for them to go through the process of learning why it is important to save and how to save. So start with the piggy bank and teach them to put a portion of whatever they get into the piggy bank. Make sure that whatever amount they get from you, the grandparents and all other sources are in small enough denominations that can be sorted and portioned. Try 10% as a start.
Once they understand the concept of saving, be sure to let them know that you save money by putting it in a credit union or bank. Let them know that saving is the practice that allows you to buy them food, the home they live in, the clothes they wear, the car they ride in, the toys they play with and the trips they take. If you did not save, they would not have all the wonderful things that they have.
Teach them that their desires can be obtained through setting goals and saving a portion of all the money that they receive. Get them to tell you what they want and they need. Help them to prioritize for you so the importance is clearly defined. Now assist them in coming up with a plan to achieve whatever is on the list. It’s Ok to for you to assist toward their saving for something they need because good habits can and should be rewarded.
If they can understand setting goals and know that saving is a way to achieve things that they want or need, then it is time to assist them in opening a saving account at a local credit union. Be sure to take them to make their regular deposits and teach them to read their monthly statements so they can see how much money they have and how it is getting closer to the amount needed for their goal.
If you take the time to practice some of these techniques, you will be on the way to having a Money Smart child!
In summary, remember these pointers:
- Start early
- Show emotional joy from saving
- Teach them the difference between a want and a need
- Teach them how to save
- Teach them to set goals
- Teach them how to make a deposit and how to read a statement
Our next blog post, Part 3 in the series: Ways to Guide a Child to Financial Maturity and Security, we’ll provide suggestions to teach them about the importance of interest!
Please stay tuned and feel free to leave your comments.