Monday, August 10

HOW TO: teach your child about money

It’s never too early to provide your child with a strong foundation of financial wisdom and guidance. Learning financial principles at a young age will set the stage for a smoother transition into adulthood. From making small purchases with his or her own money to paying for college and beyond, wise financial stewardship is an essential skill.   

The Forbes article titled “The 5 Most Important Money Lessons to Teach Your Kids” encourages parents to take advantage of teachable moments in order to advise children about personal finance. For example, include your six-to-ten year old when making purchases at the grocery store. Give him or her several dollars and allow the child to make a selection based on parameters you have given (e.g. money must be spent on fruits or vegetables, cost not exceeding the specified amount, etc.). Parents should also remain interactive while shopping with children. Talking aloud and posing questions to your child, such as “Is this item essential?” or “Should we save money by buying an off-brand item instead?,” will keep him or her engaged in the activity and foster the concept that money is finite.

A U.S. News & World Report article, “7 Ways Smart Parents Teach Their Kids About Money,” references CEO of Steve Schaffer’s method of teaching his own children about money. When doling out weekly allowances, Schaffer deducts a quarter for “family taxes” and requires each child to put 15% of the week’s money into a savings account. The child may then choose what to do with the remaining amount, which is where a multitude of teachable moments occur organically. For instance, instead of buying the toy that your child has been begging for, encourage him or her to set a goal and save their own money for the purchase. This is a perfect situation for eliminating instant gratification and teaching goal-setting, money saving, and perseverance. As discussed in past blog post “HOW TO: Foster a Strong Work Ethic,” present opportunities for your child to earn extra money by establishing a list of chores to be completed for payment.

Another idea to consider is using a clear container instead of the classic piggy bank. This will give your children a visual reminder of their saving and purchasing goals. You can also teach the value of coupons and sales by encouraging your child to hunt for coupons in the newspaper. Also, consider limiting the amount of advertising your child is exposed to when trying to teach money-conscious values. Open a dialogue about advertisements and commercials by asking questions like “Would you spend your money on that?,” “How much do you think that item costs?,” or “Do you think we really need that item?” View past blog post “CHALK TALK: Helping Young Children be Aware of the Purpose of Advertising” for more about parenting in an ad-saturated world.

Contributed by Rebecca Stokes, Fairmont Private Schools

Image by Claudio Jule, Free

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