Money    

Dollars and Sense: Teaching your kids about money



Smart financial parental knowledge can help your kids in the future

In August 2009, I wrote about how you can explain our country’s economic situation to your children. While you are explaining to your children, it is a great opportunity to help them to understand the issues regarding money and money management. Explaining family finances and giving your child a responsible part in it will serve them well later in life when they are on their own. The following are some ideas to help your children understand the money cycle and how money is spent within the family:
  • Savings account: If your child has asked why this recession happened when it did, part of your explanation can include a description of ‘runaway spending.’ What better time to begin a savings account for your child than during a recession. Kids will learn a lot from their first savings account. They learn about banking, how their money will earn interest and also about budgeting. It will also be a lot harder for them to take money out of their bank account and spend it frivolously when they have made such a concerted effort to save.
  • End entitlement: Kids today have never known an economic downturn and many have never known a time where whatever they wanted wasn’t given to them. There are many theorists, and quite a few books and articles, written recently that call the past 20 years, “The Age of Entitlement.” This era of perpetual growth now appears to have come to an abrupt halt. This is a perfect time to teach about economic cycles and the concomitant issues that come with these cycles. It’s time for all of us, kids included, to come back to reality with regards to spending. Many kids today have grown up with no idea how much things cost, and look at money as coming from an endless parent generated cornucopia.

One of the hardest lessons your child needs is good financial sense. Learn how to teach them here!


  • Teach them how to shop: End the ‘I have to have it now’ mentality. Many children and adolescents shop with this mantra as a mindset. Teach them about the relentless and even brutal marketing of trendy clothing and electronics, almost forcing children and adolescents to voraciously consume. Explain how manufacturers ruthlessly target kids and adolescents to BUY, BUY, BUY, and it must be now or else you will be out of step with everyone else. Show them that in a short period of time everything in these trendy shops in the mall will be on sale and that the time to buy is when these initial prices are drastically reduced.
  • Time for an allowance: How many of you were put on an allowance when you were a child? Was that allowance tied to the chores you needed to do around the house? Isn’t this the perfect time to be like our parents and do the same for our children, if we haven’t already done so? Allowances are a wonderful vehicle to help teach kids not only about money but also about responsibility, and at any age need to be tied to some type of responsible chore around the house. As I mentioned in Hudson Valley Parent, this is a time when the family needs to all pitch in and make some sacrifices, and above all share the responsibility of helping the family run smoothly. To help reinforce the concept of how to develop a budget, a child should be putting a portion of their allowance in their bank account.
  • Money for good grades? I’m often asked if a child should be paid for getting good grades or receiving a good report card. There may be extreme circumstances where this might be done, but as I general rule I would say, emphatically, “No.” There are numerous other ways to motivate your child do his or her best rather than paying them to do so. Even if money does work in the short-term and their grades do improve, any specific reinforce loses its ability to motivate. Once the money stops its magic, than what do you do? Developing achievement motivation in children is a complex and individual process requiring knowledge of how your child learns best as well as a thorough understanding of his or her strengths and weaknesses. Your child’s teacher should be an excellent resource to help in this area. Stay away from money as a possible quick fix in this area.
  • Cut up credit cards: The research in this area is clear -- credit cards encourage overspending and impulse buying, not to mention the often 20% interest charges attached to them. It’s very cool to be a young child and pay with a credit card; it’s also a great way to get into debt. Help your child to be “cool” in other ways that won’t strain the family finances.
  • Work: Nothing helps children and adolescents learn about the money cycle like working for the money they spend. When they get jobs and then have to take the hard-earned cash out of their wallets to pay for something that they usually don’t need, it’s a lot more difficult to part with their salaries. Whether it’s running a lemonade stand, cutting the neighbor’s lawn, a paper route or a shift at a fast-food restaurant, part-time work is beneficial to a child’s sense of self-worth at any age.

These are tough financial times for us all. When our children understand what’s going on in our economy and learn how they can contribute to the well-being and maintenance of the family’s finances it not only helps alleviate their and the family’s stress but elevates their sense of self worth as well. Every member of the family participating during a difficult period also has the benefit of strengthening the family bonds and bringing everyone closer together, not a small benefit.

Be honest with your money issues. Read how how honesty can relieve stress, and might help you find solutions.