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Guest Post: Thoughts on Raising Money-Smart Kids

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All this week, Consumerism Commentary is featuring articles written by others. This guest post comes from Golbguru, author of Money, Matter and More Musings.

Recently, I have been reading excellent articles on the subject of kids and money. The most noteworthy among them being Allowances for Kids: Teaching Children the Value of Money by JD Roth at Get Rich Slowly, Wise Spending Habits for Kids by JLP at AllFinancialMatters, and 15 Ways to Teach Kids About Money by Paul Richard at FamilyEducation. My initial thought was, “Wow, this issue has been beaten to death.” But after spending some time thinking about it and after a few brief retrospective forays into my own childhood, I figured out that I have something more to share on this topic. Below, I will attempt to list some of my half-baked thoughts.

First, let’s start with some simple in-house efforts.

Give them age appropriate financial concepts to handle. Don’t try to teach them too much, too fast. You can’t try to grow a tree from a seed any faster by drowning it in disproportionately large amounts water and fertilizer. For example, one of the articles suggests: “Alert children to the dangers of borrowing and paying interest. If you charge interest on small loans you make to them, they will learn quickly how expensive it is to rent someone else’s money for a specified period of time.”

I know a lot of adults who have a difficult time understanding this. If you push it too hard, you risk having a kid who may hate talking about money for the rest of his life.

Don’t undermine passive learning. Kids have an incredible ability to pick up habits from their parents. Make a conscious attempt to discuss money matters in the presence of your child. She will probably pretend that she is not interested, but believe me, her brain is catching every word you say..

Make money concepts fun. For young kids, introduce financial concepts through games and toys. Monopoly is an excellent example for this. You could probably deliver a year’s worth of knowledge to your kids over a couple of games of Monopoly. More importantly, they will absorb everything you say in their eagerness to play the game. Give piggy-banks as gifts for smaller children.

“Keep the change” method. Put your kids in charge of small grocery purchases. Give a $5 bill and tell them that they can keep change and build their own fund with it. Eventually, they will figure out how to maximize their funds and discover “smart shopping” on their own. My opinion is that kids learn better when they *discover* stuff instead of someone giving them instructions on how to do things.

Encourage basic math. There is a very close relationship between the numbers, calculations, and money (although I cannot really point out what the exact relationship is). A kid who is comfortable with math will probably feel more comfortable with money in the long run as compared to a kid who doesn’t like math.

Give them the gift of curiosity. Encourage your kids to ask questions about things they don’t understand. This may mean that your kid will ask a thousand questions about small things, but try to answer them all (without frowning). This also has lots of favorable implications in the long run. In all probability, this minimizes their chances of falling for scams in later years.

Don’t bias them. Some people may disagree with this, but it’s important not to bias kids in favor of (or against) cash or credit cards. Because, once they decide that a certain mode of payment is “evil,” they would be reluctant to learn more about how it works. If you want your kids to make informed decisions, instead of ignorant decisions, it’s important that they are knowledgeable about all possible choices.

Draw questions from them. Instead of reminding them directly like, “You have no idea how hard we work to provide you all these things,” tell your kids stories about poor children around the world and how some of them don’t have a proper house, a car, or a school. Raise some questions in their mind about why such differences exit between people. This will make your work easier in making them appreciate their current privileges.

Efforts on a larger scale

As a part of a bigger picture, we, as a society, could do something more for the kids.

Personal finance courses in schools should be offered with some real-time banking experience. Some system could be devised where schools run very small scale banks and allow the kids to actively participate in the operation of such a set up. That will be something much more valuable than imposing homeworks and exams.

Another way to introduce personal finance concepts in schools is to incorporate some money related number crunching problems in regular math syllabus. That way, concepts could be introduced gradually (from basic to advanced) over a number of years and most students would probably be better suited for an exclusive personal finance course in the future.

Start introducing money in popular TV series, comics, story books. Small kids will probably learn faster from Elmo or Cookie Monster than they will learn from you. Older kids will probably be quick to accept money management tips from their favorite football player or their favorite rock star. This may work better than trying to teach the same things as a part of a formal course.

I could go on and on with this, but I don’t want to scare Flexo’s readers away from his blog. So let’s pull the plug on this monologue here and ease Flexo’s fears. :)

Parents, would-be parents, former parents, and former kids, your valuable insight (or personal experiences) regarding this topic would be greatly appreciated. :)

For more from Golbguru, visit his blog, Money, Matter and More Musings.

Published or updated April 5, 2007.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 5 comments… read them below or add one }

avatar 1 Anonymous

My little girl is only three, so I don’t know if she’ll turn out to be money smart. I think the bottom line, though, in teaching about money is to just not be a knucklehead. Just a few basics are enough. You all know them already – spend less than you earn, etc.
My parents were horrible money managers. I paid little attention to what school education I got on the topic. Predictably, I fell victim to the same trap many people do – went to college on loans, maxed credit cards, you know the deal. Eventually I learned the hard way.
If I can do anything to help my children, I imagine it will be to just set a good example. Golbguru points out that kids listen even when they appear not to. I’ll try to include her when we talk about money and explain things if she’s interested. That’s about all I really think I can do.

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avatar 2 Anonymous

Thanks for the ideas! There are so many people clueless about personal finances today, I’m determined our young son won’t grow up to be one of them. New ideas are always helpful.

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avatar 3 Anonymous

I think explaining the concept behind checks, credit cards, or ATMs is important. A lot of kids think ATMs are money machines and checks *are* money. Parents should explain accounts to children.

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avatar 4 Anonymous

Great article! I especially like the idea of encouraging basic math – especially for young girls. Girls are often given the impression that is okay if they are not good at, or do not like math. I also love the idea of making money concepts fun. I recently wrote a post on my blog about ING’s recent contest, Adventures in Savings, a fiction-writing contest aimed at teaching young children the value of money. Check it out!

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avatar 5 Anonymous

I’m a daughter of immigrants and we always knew that everything was limited by how much money we had (or didn’t have). My parents NEVER hid their financial concerns from us ….. looking back …. it definitely made us respect money and it made us less likely to ask them for frivolous things. We never felt like money was only their concern …. it was always a family concern. 75% percent of their children went on to become savers and all of us have earned a salary as soon as we were able to get working papers. We all have strong work ethics.

Now I am married and living in surburbia ….. how can I teach my kids the value of money? I definitely agree …. including them in family financial discussions/decisions is important. I hope I teach them just 1/2 of what my parents thought me.

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