Money Concepts to Convey to Your Child
The topic of money is a big one. Where do you start? How do you go about teaching it?
For the most part, all money education is focused on certain general topics:
- Earning money. This means putting in personal time and effort to receive payment.
- Saving money. This means setting aside money today so that it will be there in the future.
- Spending money. This means using money that's been earned or saved to pay for things.
- Borrowing money. This means using money that will have to be repaid in the future at more than what was originally received.
According to some child experts, a parent can start explaining about earning money, saving money, and spending money as soon as children can speak. Kids probably can't understand what borrowing is about until they're in elementary school and can appreciate what interest on borrowing really means.
Financial Building Blocks
According to a nationwide survey of high school students sponsored by Jump$tart Coalition for Personal Financial Literacy, almost 60 percent of the kids surveyed said that they learned about managing their money “at home from my family.” This compares with only 11 percent who said that they learned about money management at school.
Monkey Sees and Hears—and Monkey Does
By now, it's not news to you that your child picks up on just about everything you do and say. You're the main example of how to act. Whether consciously or unconsciously, your child will mimic your behavior.
When it comes to learning about money, how you act with it and what you say about it is perhaps the most influential thing you can do to instruct your child. This means that you should be sensitive to what you say and do about money matters; you're in a unique position to have a positive (or negative) influence on your child's ability to handle money.
Your actions and words about money should be consistent. If you say one thing but do another, your child will see through this hypocrisy very quickly. On the other hand, consistency will reinforce all your efforts; what you say will support what you do, and vice versa.
Watch Your Step
Financial words can be very confusing because one word can have two or more very different meanings. For example, kids are always talking about bonding with each other—they probably don't have the vaguest idea that “bond” also refers to a debt instrument. And an “instrument” isn't only something you play to make music; it's also a financial obligation that makes money. Don't assume that your child understands the money-meaning of a word.
Setting an Example
Children are smarter than you think. It won't take your teenager long to know you're in financial trouble if the bill collectors are calling every day and you've instructed him to say you're not in.
Setting a good example isn't dependent on how much money you earn or how much you have in the bank: It's about instilling the values and attitudes you hold about money. You could be living on a tight budget and might show your child a thing or two about responsibility.
Talk Isn't Cheap
When I was in elementary school, I used to ride my bike to the candy store down the block to get my father a copy of the World Telegram Sun, an afternoon newspaper that had the closing stock market prices. (The New York Stock Exchange closed at 3:30 in the afternoon until 1974, when the closing bell was changed to 4 P.M.). When he'd come home from work, we'd sit down to dinner as a family. Between courses, my father would thumb through the paper and casually tell my mother as she was serving dinner various stock prices, noting what was up and what was down for the day. The alphabet soup of ITT, RCA, and IBM didn't mean a lot to me at the time, but looking back, I confess that I did learn a lot about investing just by sitting at the dinner table. My dad was no tycoon, but his talk about the market helped me learn the terminology—stocks, bonds, splits, dividends, and more—just by being there.
Today, it's no longer the norm that families sit down to dinner together each night. Hectic schedules lead many families to eat on the run, one by one. Children lose out on the opportunity to pick up valuable information in an offhanded way. Still, there are many opportunities for talk:
- Family meals. With a little extra effort, the family may be able to dine together on some nights during the week. There's always the opportunity for a weekend meal together, too, even if it's Sunday brunch.
- In the car. Suburban moms and dads say they're always in the car—I used to think I spent more time carpooling each day than sleeping. This may sound like a negative thing, but you certainly can turn it into a positive. Usually your kids are in the back seats, so they're captive audiences for conversation. Even when kids get older and are driving on their own, parents still spend a good deal of time in a car with their children, driving to doctors appointments, soccer games, and school events. There's plenty of time for talk.
- Leisure activities. Parents often socialize with their children through sports or other leisure activities. A round of miniature golf or an afternoon of fishing can provide opportunities for conversation.
Excerpted from The Complete Idiot's Guide to Money-Smart Kids © 1999 by Barbara Weltman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.
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