Money Management Skills For Children and Their Parents
Introducing money management skills to your children may initially seem overwhelming. Where do you start? What’s appropriate? How much or how little do you cover? The problem is compounded if you yourself aren’t particularly well versed in money management.
Realize first that family discussions concerning financial matters should be a very casual thing. Issues surrounding finance are often treated as taboo subjects by many families. This really shouldn’t be the case. Teaching your children about money is no different than dealing with any other skill. By simply including it as part of your everyday discussions with your children will go a long way to help them learn. How else are your children going to learn the fundamentals of money management if it is never dealt with by the family?
What you teach your children and how you go about it obviously depends greatly on their age level. It is commonly accepted that a good time to start is when a child reaches six or seven years of age. Like with most skills, there won’t necessarily be a perfect time. One strategy is to try something and if it seems to be too complex an issue to deal with, wait a while and try again. Often, it’s just the process of talking about things with your children, reinforcing ideas, and repetition that will help get the ideas across.
You need only to look around your daily activities to find many great teaching opportunities. Let’s look at a few examples.
Taking your children grocery shopping is a common activity and it provides a wealth of teaching opportunities. Let your children compare products to see how prices vary for the same item from one manufacturer to another. You can point out the differences between brand name and generic products. Let them know what criteria you use when making your selection. Product sizes can be compared to understand the value of an item and how bulk or volume purchasing can affect price. What about the cost associated with convenience? Whether it is enhanced packaging, smaller sizes or reduced quantities, point out to your children that convenience comes at a price.
As you come across items that are on sale you can explain the idea of price reduction and the benefit of keeping an eye out for such bargains. Items go on sale for a variety of reasons. Perhaps the manufacturer is trying to increase volume or bring some needed attention to an established product. Products may be put on sale because they are close to their expiration date or the line is being discontinued. Understanding the different reasons for sales will help your child be a better consumer. Often a small amount of attention can be rewarded with substantial savings.
Manufacturer or store coupons are another great way to stimulate interest in money matters. Just think of the amount of money your child could save over a lifetime if properly introduced to this simple yet powerful money management tool. There are people that have turned shopping with coupons into an art form.
There are many people that avoid using coupons either because they don’t want to devote the extra time to collect them or treat coupon clipping like it has a certain stigma associated with it. If you fall into this category, here’s an idea that could be helpful. Bringing children along while grocery shopping can be stressful. Keeping them busy will make the whole experience more pleasant. Encourage your children to deal with the coupons themselves and reward them with the amount you save. It will give them something to do while you’re getting the groceries, they’ll make some “free” money and they’ll be learning a valuable money management lesson at the same time.
At the Checkout Counter
These days, with most transactions occurring electronically, the idea of exchanging money for goods and services becomes more abstract and doesn’t provide children with a way to make the right connections. Children should be taught to pay attention to what prices are being scanned in at the checkout counter. It’s not unusual for mistakes to be made. Have them note the prices for certain items you intend to purchase then compare that price to what gets scanned at the checkout counter. It helps develop their memory skills and keeps them occupied while at the checkout counter.
If you normally don’t pay for groceries with cash, consider doing so once in a while. This will give your children a more meaningful experience than they can get by simply paying with plastic. Let your children figure out how much money they need to give the cashier and have them verify the amount of change returned.
Even though an increasing number of transactions are dealt with either through credit or debit cards, it’s still important for your child to understand the relationship between how items are priced, how you are charged for them and how they are paid for.
Most homes have fliers delivered to them. Fliers are an excellent way for your children to compare prices, identify sales items, and help plan your grocery purchases. The added bonus is that it can be done at home. They’ll be able to see for themselves how prices vary, even for exactly the same item, and they’ll start to develop their shopping skills and become savvy consumers in the process.
A fun exercise for your children to try is to take the grocery receipt and compare what you paid for items with what is advertised in the fliers. Your children can determine whether you got the best deal or whether you could have saves yourself some money by shopping elsewhere. The idea is to create opportunity for dialogue about pricing so they can be better informed about not just the cost of everything but also the value.
Time to Pay the Bills
Another excellent teaching opportunity is when you are paying your household bills. Your children can see what it takes to run a household and how expensive things really are. They can be introduced to concepts like checking accounts, late payment fees, interest charges, and online banking. It is one thing to be constantly reminding them to turn off the lights or not to leave the hot water running but giving them concrete examples of the costs makes it easier to understand the monetary value.
Telemarketers and Junk Mail
Although it can be terribly annoying to always be sold to, here’s a practical use for those telemarketing calls and junk mail you receive. It’s a competitive marketplace out there and we’re frequently wooed by companies to try new products, subscribe to a service or switch suppliers. Share your thought process with your children so that they see how to compare one supplier versus another. What made you decide to switch or not. Is this an interesting offer? What makes it interesting? One thing is certain. Your children will inevitably be the targets of unsolicited sales pitches. At the very least teach them what you know so that they become informed consumers. How else will they learn?
Restaurants are another great place to learn about the value of money. Children can look at menus to see what various items cost, what is included with their meals, and any specials being offered. They can practice calculating what the bill will come to, be introduced to the idea of tax as well as tipping. Perhaps they can be given a set amount of money to use for their meal to practice budgeting.
One final but important lesson that can easily be taught through everyday activities concerns impulse shopping. Although impulse shopping can be fun, it often comes at a price. You end up buying something you don’t need, or pay more than you otherwise would have. There’s always going to be temptations and unexpected opportunities. An important point to remember as well is that you don’t want to eliminate all of the fun and spontaneity that comes from occasionally splurging. The lesson to leave your children with is that they need to recognize impulse buying for what it is and maintain a level of control over it. Impulse buying can easily get out of control and lead to destructive financial behavior.
These are just some examples of ways you can casually introduce money management skills and concepts to your children. In your day to day activities, keep an eye out for other opportunities that will undoubtedly come up to improve their financial literacy.