One game my kids play when we are out at a store is "who gets to pay!" They each attempt to be on their best behavior and the winner of each trip is awarded the prize of taking my credit card out of my wallet and putting it into the machine, waiting for the BEEP BEEP and retrieving both the card and the receipt. It's quite the experience and I have often thought... this is not teaching them much about personal finance. So, we started implementing games and exercises from a young age to open the door to real life, grown up topics we all integrate into our adult lives.
April is Financial Literacy Month and we often discuss in our office how personal finance has seemed to work its way out of the general curriculum. In light of Financial Literacy Month we wanted to share with you a few ideas on including your children, whether age 5 or 18 in financial discussions. It's never too early or too late to start having these discussions as your relationship with money as a resource provides your foundation for decision making throughout your life.
Walk the Walk
Often, children's spending habits are largely influenced by their relationship with money growing up and watching their parents or family members. If you don't have a fantastic relationship with your finances be mindful of how you express this with your children. As we know, they soak up and repeat most of what they hear and see! Discussing wants vs needs, saving for a large purchase, and living below or within your means all form our foundations of our relationship with money. It's OK to wish you had done things differently and make changes to spending habits in the future. Involving your kids in large purchase decisions may help with this. You can briefly discuss with them which item costs more and why and then discuss the pros and cons of either option together. Kids will really enjoy being treated as a decision maker and may surprise you with their justification either way!
The Concepts of Earning and Budgeting
I knew we were in trouble when I told my son we did not have money today for the claw machine at the grocery store. "It's fine mom, just use the card!" was his reply. Woops! I had a message to clarify. One message I found important to the conversation was to clarify that while we could spend the money or may have the money for that purchase we have other things to purchase that come first or it might not be a necessary purchase for that day. Discuss the ideas of earning money in simple ways that they can understand. For example, that new lego set costs 2 weeks of garbage duty and a dishwasher unload. They might not grasp the ideas of hourly wages but they will understand that purchasing power comes from earning. Additionally, you can discuss budgeting in a similar way. If you're at the store to make a purchase and they have multiple items they want - you can identify the budget set for the trip ahead of time and help them select options within their budget. You can also offer an option to defer a purchase, save more in the meantime and set a date to return to the store. This simple exercise helps them identify making choices within a budget and possibly even choosing to save than spend.
Make a Wish List
Think of this as a Christmas list just for fun! Ask your child to identify their top 3 - 5 items they would like to purchase. You can use these as goal purchases and implement the concepts of budgeting, earning or planning for as you discuss. Treat these as important as your financial goals of paying off your mortgage or saving $x for college. Brainstorm ideas with your child ways to earn the purchase or earn the funds to make the purchase.
Implement a Savings Plan or Paying Yourself First
Finding loose change is how we've tackled this plan in our home. When money comes into their hands either through the discovery on the floor of the car or from a gift we discuss what we should do with the money and how much we should use. From an early age we've identified that just because an entire $5 comes into our hands does not mean an entire $5 should be spent. While it seems so very basic, a piggy bank or even just a fun jar is a great tool. One quick example here is finding $1 in quarters on the floor of the car. We might save 3 quarters right into the piggybank and bring 1 quarter to the store or out to dinner. You'd be surprised how many games and $0.25 candy machines still exist. It's a great way to experience a little bit of "extra" by spending but also feel good about saving the other $0.75.
Keep it Simple
It may seem overwhelming, one more thing to do! But, I encourage you to keep it simple. Take the stress out of the "Gimmies" and discuss personal finance with your children in simple age appropriate ways. Your kids just may surprise you with their responsible decision making when given the choice.