Teaching kids about money can be rather challenging, but the lessons learned could be invaluable. So rather than stressing about trying to explain why your child has to put something back on the shelf take those opportunities to teach them about money.
I’ll never forget driving with my wife and daughters (ages seven and eight at the time) when my eldest saw something or heard something on the radio that prompted the “I want…” whine. I promptly began the speech that it was too expensive and we just didn’t have the money for that item. I began to complain to my wife saying things like, “ They just don’t get it”, “They think that money grows on trees”, “Should I go to the $50 tree or the $100 tree?”…yadayada. Thinking that would put an end to the whining my daughter confidently declared that we should, “Just go to the bank and get some”. As her comment began to sink in my wife succinctly stated, “Ned! They don’t have a frame of reference!” She was absolutely right! In retrospect, all our daughters would hear at home when we discussed money for household items was, “Just go to the bank and get some.” In fact it was the “only” frame of reference she had so it was obvious to her that’s all one had to do.
Needless to say, this was one of those teaching moments, so we discussed an allowance of $5.00 per week for each of them. However, in order to “earn” the allowance we devised a list of chores that were to be completed daily. But the caveat was that every time a chore was missed we would deduct $.50 from the $5.00. Up went the list of daily chores along with a running total of weekly earnings on the refrigerator door. We explained that they could either spend their weekly earnings or begin to save for something they really wanted. After each had experienced a couple of low or no pay weeks they quickly realized it was to their advantage to complete the required chores in order max out their allowance. Not only did they learn how to save but even more important was the lesson that you have to do the work for the “pay cheque.” We subsequently opened a savings account at our local bank and when they deposited their allowance they could watch the money grow in their account.
Within the last several years there has been a public push by many leading business CEO’s and financial institutions promoting financial literacy. The debate that ensued was whether financial literacy should be taught in the home or in school.
Please let me know your thoughts on teaching financial literacy or share a teaching moment that you feel would be beneficial to our readers.
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