by Tricia
My son is only five years old right now (soon to be six, though!). He doesn’t really understand many things about money, but I’ve still been trying to do a few things here and there to help him grow up to be responsible with money. We are going to give it our best shot to give him good money management skills.
Thanks to another blogger holding a contest, I was able to get a Money Savvy Pig for my son for free. This special piggy bank has four slots where kids can put their money: Spend, Save, Invest & Donate. It has been fascinating to watch my son divide up his money. I thought he would put everything into the spend slot, but he has put money into all of them. He’s a little confused as to what it means to donate (he keeps trying to give Mom and Dad the money in the Donate slot LOL), but hopefully with the Christmas season soon upon us, he’ll understand it a little bit better. We’ll give him choices as how he can donate his money.
I’m also planning on giving him a special extra bonus when he loses his first tooth. Along with a gold dollar (if I can get a hold of some), he will get a $25 savings bond from the tooth fairy. When he’s older, he can see how much money that savings bond grew into.
Probably the hardest part (but also the best part) is to teach him about spending money wisely. He often sees toys on TV or in the store and says, “I want that!” Times like those, I try to point out similar items he may already have at home. If it’s construction related, that is pretty easy to do. Other times I may try to show him similar items that are more affordable. Another thing that I do is to point out things I would like, but I do not buy them. I try to show him by example that sometimes there are things Mommy and Daddy want as well, but we do not buy them. I also now talk through my thought process when comparing what items to buy so he can listen in and be an active participant.
This older article from Forbes agrees about the role model part:
“As a parent, the best way to teach a child about finances is to be a role model,” says Edward Powell, chief consumer officer at LendingTree.com in Charlotte, N.C. “You should show restraint with money. Your child should see you budget, comparison-shop and make regular contributions to a savings account. It’s not enough to talk the talk, you’ve got to walk the walk.”
[Via Forbes] (thanks Amy for the link!)
There is a balance, though. While you want to make sure your children understand spending limits and budgeting, I don’t think you should let them in on your specific financial situation. For my son, he has no idea right now about our debt situation and he likely won’t know about it for some time. He still has the right to be a kid and not be burdened by our financial problems.
For those of you with children, is there anything special you are doing to try to teach your children about money?
That reminds me, it’s almost time to do a little personal finance interview with my son again (we did one when he was four and did another one when he was five). I love hearing his answers 🙂
I love that pig and just wrote about it on my blog. I’m starting to teach my kids about money – well they are already very price conscious kids, but we are starting them on allowances next month. I’m excited – they do see me compare prices, shop around, etc. The only ‘bad’ part is I pay the bills online so they don’t see us paying for the house, utilities, and I often comparison shop online too. Of course I should just sit them down and have them start watching – no time like the present!
Mr. Micah was rather traumatized as a kid by hearing his mom talking to his dad about their debt. They were very much in debt and she was trying to motivate him to get his act together. She said “They’ll put you in jail if you don’t pay this off!”
And to a little kid, that’s terrifying. His mom meant what she was doing for the best and I’m sure she was quite frustrated with his dad, but it wasn’t good for him to know how deep they were in debt.
Of course, there were other parts he couldn’t avoid knowing, like that collections agencies called and left threatening messages.
I think the best thing is to model good financial practices to the kids. My mother told me that they had some credit card debt (as a way of showing that even smart people can get into debt) but that they were on top of paying it off so I didn’t have to worry.
Tsoniki – I have that problem too. We rarely pay with cash because I do not like using it (too easy to lose). It’s so hard for them to understand debit cards and checks.
Mrs. Micah – If I heard that as a kid, I would be scared too. I think your mom has the right idea.
We have four children, ages 5-12, and teaching them about debt is an ongoing thing. I don’t want to get into specific numbers but we try to talk about a spending plan.
The youngest obviously isn’t as “up” on it as the next one and so on. We try to encourage using your money for what you really want and not just some fad. Something new will be once they make a purchase we want to revisit it in a month or so to see if they are still using the purchase.
I too have given my son the money savvy pig as well as to my nephews and also the cash caches for the older ones.
One book that has helped me alot with teaching my son is The Financially Intelligent Parent. It really makes you think about how you are portraying money to your kids. 🙂
Throw out the TV. Its the worst thing in the world. It took me a while (about 1/2 a year) and now I don’t miss it. Sure I can watch a movie when I want (There is a thing called Red Box at our grocery store, 1 movie until 7:00 PM the next time for $1). If you son doesn’t see it, he won’t want it. He can read (the libarary is a great place for free books) and study. There is so much more for kids then TV.
I think Money magazine did a thing on teaching kids and using family money. The created their own currency and the kids had to buy their meals, their bed, getting their clothes washed and things like that. It taught them how to save, spend, and do thigs for themselves. I am not sure how old the kids were, but it might be a good start for your son.
I’m going to have to look into that pig – sounds like a great idea!
here’s an excellent example of being a role model from the fiscally fit forum over at the WSJ.
Debt vs the Dream Car
http://forums.wsj.com/viewtopic.php?t=932
Tricia – here are a few ideas that might help:
1) For the “saved” money, offer to pay your child what seems like an absurd interest rate. Children generally are not that patient, so they generally don’t appreciate saving and interest at the 3% your bank gives you… But what if you gave 10% per month? Would it really cost you much? Higher rates will get the point of interest and compounding across much faster to a young child, even at an age where they don’t understand the math. Odds are they still won’t save that much up before buying something, so the interest won’t cost you much, and as they get older, you can lower the rate you pay to something more reasonable.
2) They’re naturally going to want toys… but think of alternatives to what they want. If they want a toy plane at Walmart that costs $10, why not suggest MAKING a toy plane with dad. You can make an heirloom wood toy pretty easily with just a few hand tools… that would last longer, not cost much more if you use cheaper woods, and give the child what he really NEEDS – quality time with parents… and after that, they still have the toy….
Hi Interesting blog. There is a UK web site called www.saveabitspendabit.co.uk who’s vision is to eradicate excess debt in our children’s future. There is a free audio cd to download as well as a coaching handbook, on-line game and e cards to send. We want to inspire children to create a saving’s habit, not just with money but also with resources and relationships. Hope this helps.
Are there more testimonials around the site?
Who knows what happens next… All I know is:
Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you’re a mile away and you have their shoes. 🙂