Teaching kids about money
Teaching kids how to work hard and save money is challenging for many parents. It certainly was for me. My wife and I were never quite sure we were getting through, but we kept trying. Somehow something must have worked. I am thankful to report that all five of our kids are now responsible adults, and all seem to be doing well in their personal financial lives.
If you are struggling with how to teach sound financial principles to the children in your life, take heart. Perhaps the most important thing you can do is show a good example. Kids are remarkably adept at learning by watching others.
You can also engage them in purposeful play. For example, in his outstanding book, The Seven Habits of Highly Effective Families, the late Stephen R. Covey describes a game they used in their family to teach money values to their children.
He and his wife Sandra set aside one night each week to spend with their children, playing games, having fun and teaching them about God, family and life. Covey describes one of these evenings as follows:
“One of the family times our children remember the most was when we played a game to teach them some principles of financial management.
“We set up several signs in different places in the room that said such things as ‘Bank,’ ‘Store,’ ‘Credit Card Company,’ and ‘Charity.’ Then we gave each of the children some object to represent work they could do to earn money. Our eight-year-old had some dish towels she could fold. Our ten-year-old had a broom to sweep the floor. Everyone had work to do so that they could earn.
“When the game began, everyone started to work. After a few minutes, we rang a bell, and everyone got ‘paid.’ We gave them each ten dimes for their labor. Then they had to decide what to do with their money. They could put it in the bank. They could donate some to charity. They could buy something at the ‘store’ where we had bright-colored balloons with the names of different toys and the prices written on them. In fact, if they really wanted something badly from the store and didn’t have enough money to buy it, they could go to the credit card company and borrow enough to get it.
“We went through the sequence several times: work, earn, spend; work, earn, spend. And then we blew a whistle. ‘Interest time!’ we said. Those who put money in the bank got money added. Those who had ‘borrowed’ from the credit card company had to pay interest. After several rounds, they quickly became convinced that it was much smarter to earn interest than to pay it.
“As the game progressed, the children also saw that those who chose to donate to charity were helping to provide food, clothes, and other basic necessities for people throughout the world. And as we popped some of the balloons when the ‘interest’ whistle blew, they also realized that many of the material things we work so hard for and even go into debt for don’t last.” (“The Seven Habits of Highly Effective Families,” Stephen R. Covey, Golden Books, 1997. pp144-145)
Not surprisingly, there are also technology-based tools for teaching money principles kids. I recognize that the last thing some parents want is to encourage their kids to have more screen time. However, if you are open to technology, I encourage you to look at three apps: Greenlight, GoHenry and FamZoo. Each of these apps allows parents and kids to track and pay for chores as well as teach many important financial principles.
If you would like a non-tech approach, there’s a new book on Amazon by Vera Hoskins called, From Mean to Bean. My wife read it and loved it. In her book, Hoskins describes how she created a home economy using beans. In the process, she got her house clean and her six kids learned important financial principles. Sounds like a win-win to me!
Steven C. Merrell MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey. He welcomes questions you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940 or email them to firstname.lastname@example.org.