7 Essential Money Lessons for Kids

Mounting research shows that we have nothing short of an entitlement epidemic gripping today's youth. The books Generation Me and Generation Debt (by two different authors, no less) make rather fitting bookends: narcissistic entitlement at one end, and financial ruin at the other.

As the season of giving brushes elbows with the cabal of commercialism, we're presented with -- to borrow from the classic education vernacular -- an ideal "teaching moment."

But exactly how do you persuade material boys and girls to enjoy giving as much as they love getting? Here are seven tips to help instill some big-heartedness in the little ones.

1. Teach them to value every dollar. Tired of playing shopping-cart bad cop? Give your child spending power by turning the yes/no verdict over to Junior. Children who are free to spend their money on whatever they want (provided it doesn't require gunpowder, gasoline, or a parental signature on a safety waiver) are more thoughtful and less impulsive -- after a while, at least.

2. Make dollar decisions tangible. Even adults have a hard time visualizing mounting debt or increased savings. Help your children grasp such concepts with visual cues: Illustrate important allocation lessons of short-term and long-term savings and charity with separate piggy banks for each (or a single one designed specifically for this purpose), or even with a running tally on a whiteboard.

3. Pull back the curtain on retail marketing tricks. Kids don't like being told what to do. Show them that advertisers are bossier than Mom and Dad are with a set of interactive lessons on common marketing mind tricks, available at pbskids.org/dontbuyit.

4. Reward savings behavior. According to sharesavespend.com, our kids today spend five times as much money as we did at the same age (adjusted for inflation). Reverse the trend by rewarding responsible cash conduct. Set up a kiddie version of a 401(k) and offer to match money that they sock away for themselves and others (e.g., $0.50 for every dollar they save for themselves; a dollar-for-dollar match for money they raise for a good cause).

5. Let them pick a charity. Get online together and find a cause they can relate to. (Try charitynavigator.com and worldvision.org.) Or find a local charity and take your kids there to see firsthand how their bequests will help. Have them deliver the donations (cash, toys, clothes, etc.) themselves.

6. Get them excited about stocks, not stuff. The stock market (and the passage of time) can also reward the little ones in a big way. Engaging kids in investing pursuits is easy: Just explain that when they buy a share of stock, they become part owners of the company, not just a customer. (A seat on the board, however, may have to wait until after they're old enough to drive.) Every moment of every day, they're presented with investment opportunities, from breakfast (Kellogg (NYSE: K  ) ) to lunch and snacks (Kraft (NYSE: KFT  ) and Coca-Cola (NYSE: KO  ) ), to entertainment (Disney (NYSE: DIS  ) ), a weekend stroll at the mall (Urban Outfitters (Nasdaq: URBN  ) and Gap (NYSE: GPS  ) ), or taking in a movie (Netflix (Nasdaq: NFLX  ) ). And if saving money to buy more stock replaces saving money to buy more stuff, even better.

7. Show your gratitude for your family's gifts every day. The most powerful illustration of the good that comes from giving is gratitude. Share how grateful you are to be able to afford that flat-screen TV and how much you appreciate gifts (tangible and intangible) from others. Talk to them about how you are paying it forward, and openly share the joy you get from helping others. Being thankful is a lesson worth revisiting year-round.

Finally, call Junior over to the computer, and together, you can help other kids become smart about money. The Motley Fool's annual charity drive, Foolanthropy, is aimed at eradicating financial illiteracy.

This year's Foolanthropy drive supports DonorsChoose.org, a nonprofit organization that provides a way for people to make a difference in public schools. Through Foolanthropy's partnership with DonorsChoose.org, you can help fund specific projects dedicated to financial literacy. The drive will run from now through Jan. 20, and at the conclusion of the campaign, the Fool will kick in $10,000 for the cause. 23 projects have been funded thus far, reaching a total of 1,885 kids.

DonorsChoose.org has been highlighted as "the future of philanthropy" by media ranging from The New York Times and The Oprah Winfrey Show to the Today Show and CNN Newsnight.

For more on Foolanthropy:

This is an updated version of an article first published Dec. 18, 2007.

Dayana Yochim owns none of the stocks mentioned. Kraft Foods is a Motley Fool Income Investor pick. Coca-Cola, Gap, and Walt Disney are Motley Fool Inside Value picks. Netflix, Gap, and Walt Disney are Motley Fool Stock Advisor picks. Try any of our Foolish newsletter services free for 30 days. The Fool is investors writing for investors.


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  • Report this Comment On December 23, 2008, at 3:15 PM, Shari83 wrote:

    Thanks for this posting!  To research charities, there's also http://www.greatnonprofits.org/ where you can read reviews of nonprofits. The reviews are written by people with first-hand experience with the nonprofit - their clients, volunteers, board members, donors.

    ~Shari Ilsen

    Outreach Director

    GreatNonprofits

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