Children, under the age of 21 generally have a hard time understanding that money is important and that mum and dad’s ATM machine can run out of funds!
I also stumbled on a great article on the internet Its about teaching children the meaning of costs.
http://uk.finance.yahoo.com/news/money-time-teach-children-things-cost-162700310.html
I thought i could share with my views on kids and money.
Kids and Money
What they need to know about money is:ITS VALUE and POWER!
As parents, we often tell our children, ‘no’ you cant have that, you cant have this, because its costs a lot. Children cannot comprehend ‘no’ nor “it costs a lot”. All they are thinking is, “so ”., They don’t know what it means.
I will admit I used to feel guilty when I did not get something that my sons ask for. I would explain by saying that its costs too much. My boys don’t usually throw tantrums and that would hurt even more, that they accepted my explaination.
After some time, I realised I must explain to them. I did not google this! I constantly have talks with them, usually when they are NOT asking for something, emphasing:
- The money we have is what mummy earns. Mummy has to go to work for earn the money
- Buy useful things
- Buy quality things
- Buy health things
- We will need money for the future
- It’s not about the costs
- Others don’t have what we have, lets not waste on frivoulous things
- Save – you may need it in the future
I have noticed that my boys, particularly the younger one, makes judgement on what an item costs and that it is too much. It may be working. But sometimes, Mum and Dad can in inconsistent with our actions. For example, i tend to be careful in places where we eat. It should not been unncessary an expensive place when we can get good food if not better in a food court, for instance. But Dad says no.
There are a couple of things we can do to help our children understand money
1. Give them an allowance, either weekly, daily or monthly
Explain to them what the allowance means and how to use it properly. School going children should understand that the allowance is to purchase healthy food. Education of food becomes important and thus the use of the money.
2. Open a bank account
Take your children to the bank to open an account. Take him or her through the banking in process and show him how the money grows.
For example, today you have $10 and in 6 months you will have $13.00. The power of interest and gradually teach them the power of compounding.
3. Say “no”
There is no need to indulge our children with everything they ask for. Pick your battles. For example, some parents do not buy a particular toy or game to get their children to understand how it feels when someone else has it and they cant because money is not enough. Apply judgement. If the lesson is successful, perhaps we can reward him with the toy or game.
4. Invest in their knowledge
Teach them about money. How it is made. What are companies and how they are formed and how they make money. Where does mummy and daddy fit into the chain.
You can definitely teach them simple facts about the stock market, investments and similar areas of finance. .
Look out for money classes for children around you.
There are also games like MONOPOLY or RISK, that can help children understand what is money about.
5. Teach them to budget
I wrote sometime back about teaching your children to budget when going to the supermarket. Listing the items you want to buy makes a difference.
Getting children involved in the family purchases including vacations. Ask them their view on the expenditure.
Children will appreciate budgeting skills as they grow to become adults.
6. Business Plan
Get your children to write up their own business plan. Its about income and costs and the future. Review this for them. Have a look at my article on this blog on children and business plans. http://1teachingkids.blogspot.com/2010/01/i-want-to-be-chef.html
Happy Teachning and Cooking
