Teaching Children to be Money Smart: How to Ensure Your Kids are Financially Literate
I remember it as clearly as if it was yesterday. We were at a friend's wedding reception, a group of us standing around talking about buying our first home. The children were running around having a good time, when one precocious six-year-old walked over and stood near her dad. As we continued our conversation, the father expressed his frustration about not being able to get enough money together to make the down payment. That's when his daughter chimed in.
"Well, daddy, why don't you just write a check?"
She obviously didn't understand why we all burst out laughing. But at that moment it was very clear that she also didn't understand how a checking account worked.
With the American economy in it's current state, it is important to help youngsters understand some basic concepts about money and finances in order to as to prepare them to be fiscally responsible adults as well as ease the burden that many families feel when they have to make sacrifices.
It's Never to Soon to Start Learning About Money
While most financial experts agree that understanding cash, credit and purchasing is important for building a sense of financial responsibility in children, determining the proper age to begin teaching children about money is a matter of choice
Some recommend that as soon as children are old enough to count they should be introduced to money. Whatever age you choose, as soon as children become old enough to think and express themselves independently (usually between the ages of seven and ten) they can become familiar with basic money concepts such as different monetary denominations, giving and receiving change, the cost of purchases, and wants versus needs.
The important thing is to communicate with them about financial values - what money is, how to make it, how to save it and how to spend it wisely. Help them to understand early in life that money has to be earned, not given away freely, and that the family has a limited amount to spend each month.
Activities to Help Children Understand Money
Learning anything new can be a challenge. However, placing the information in the context of the everyday world can make it relatable.
If you decide to provide your child an allowance, you can best help them understand the concept of "no free money" by clearly defining what they must do in order to receive their allowance; what chores they must complete and the financial reward for completing each chore. You may also want to consider paying a monthly, rather than a weekly allowance, in order to help your child understand the concept of budgeting.
One way to help children to learn the value of money and how to use it properly is to include them in meal planning and grocery shopping. Show them how to plan satisfying, yet economical meals, how to comparison shop, find sale and discounted items, and how to find and use store coupons as well as properly pay for purchases.
When shopping at other retail outlets, help children to understand the difference between want and need and how to find the best price for the most quality. If you use a credit card, explain how they work, the impact of interest on your account and guarding against fraud. At restaurants you can help your child understand how to review the check to ensure it is accurate and how to calculate the appropriate tip.
The whole idea is to provide children with an understanding about money so that they ask questions and seek further information about how financial systems work. This will better equip them to understand how earning a living, saving for the future and spending wisely are all linked together.
References:
http://life.familyeducation.com/ money-and-kids/personal-finance/34481.html
http://www .forbes.com/2005/03/29/cx_sr_0329kidsmoney.html
http: //moneysmartworld.com/
http://www.marketwatch.com/pf/ started/gettingstarted_kidsmoney.asp