Few parents who've seen the classic Staples back-to-school ad can forget it. It's the one with the parents dancing around with "It's The Most Wonderful Time of the Year" playing in the background as their kids glumly shop for school supplies. It strikes a chord with all of us parents fatigued by a three-month stint of quality time with inquiring little minds. Finally, someone else will be around to answer all of little Johnny's questions.
But while our children's teachers will again share responsibility for teaching them to read and write, they won't do much to help our children develop basic financial literacy skills. Beyond simple addition and subtraction, there just isn't enough time in the school day to do it all.
So what's a caring and Foolish parent to do? Take your child's money-management education into your own hands, of course. Here's how.
It's important to remember how your kids think when it comes to money (or anything else). Most children are concrete thinkers who can demonstrate progressively organized and logical thought but have a limited ability to think abstractly. Translation: Preschool and elementary-aged kids will have trouble understanding abstract concepts like inflation, interest rates, and saving for a college education that is 12 years away.
That's why, when I told my 5-year-old that we couldn't buy the carnival-sized moon bounce at Costco because "we don't have enough money," he was worried that we wouldn't be able to buy food for dinner. To him, "no money" meant, quite literally, that our pockets were empty. I should have said, "We choose not to spend money on that so we have enough money for other things we need to buy."
Understanding the way your child thinks is the key to providing him or her with a quality education in money management. Here are some ways to help your literal thinker learn about money:
- Buy your preschooler a piggy bank and give him or her a stack of coins to put in it. Ask your child to sort the coins in a variety of different ways -- shiny versus dull, big versus little, pennies versus quarters. Know that he or she won't understand for many years that a dime (i.e., the smallest coin) is worth more than a nickel, because to your child, bigger means better. Supervise carefully, though, since preschoolers sometimes still like to test things in their mouths!
Establish an allowance for your child so he or she can begin to make independent money decisions. Some folks will advocate linking the allowance to certain chores; I prefer establishing the basic chores (e.g., making the bed, cleaning your room, and setting the table) as something each person does because they are a cooperative part of a family. Otherwise, kids can tend to become hardened money-grubbers, countering a request to put their dishes in the sink with, "How much is it worth to you?" However, giving your child "extra" tasks (like washing windows or vacuuming) for which he or she can earn money can teach her the satisfaction that comes from working for a goal. Your child will also understand that the more work that's done, the more quarters he or she earns -- a valuable life lesson.
- Get your older child a specialized bank like the "Money-Savvy Pig," which has compartments for saving, spending, donating, and investing. Discussing the different ways you can choose to allocate your money will mean more when your child can see his or her allowance divvied up in four ways.
- Take your child on money-related "field trips" that show money in action. While places like the Bureau of Engraving and Printing in Washington, D.C., offer splashy tours and the opportunity to see how money is designed and printed, your local bank and grocery store can offer just as many teachable moments when it comes to money. Opening a savings account, touring a bank vault, using the coin-counting machine, comparing sticker prices, and paying for items and receiving change are a few everyday ways to learn about money.
- Encourage your child when he or she tries entrepreneurial ventures like lemonade stands, picking up sticks for the neighbors, or starting a dog-walking service. There's no substitute for learning on the job.
- Let your mouse do the walking. There are a host of wonderful websites (mostly geared for upper elementary students) that can help you teach your child about money management. Here are some:
Last, but not least, be mindful of how you talk about money. Do you complain about bills, fret about money, and always use negative terms about finances? Don't be surprised, then, if your sons and daughters feel negatively, too. If you need some financial refreshing of your own, make full use of your Motley Fool GreenLight subscription. Getting yourself on the right financial track is the best lesson of all for your kids.
So, parents, rejoice that it's back-to-school season, but remember that some lessons still start in the home. Managing money wisely is one of them.
This article is adapted from the Motley Fool GreenLight "Money Answers" archive, which features more than 100 articles on personal-finance topics from taxes to credit to beginning investing, organized by subject and life stage. For access to this content plus the current newsletter, back issues, members-only discussion boards, and advisor blogs, take a free 30-day trial to GreenLight today!
Fool contributor Elizabeth Brokamp writes a weekly column, "Ask Mrs. Riches," on money and relationships. Her charming other half is The Motley Fool's own Robert Brokamp (TMF Bro), editor of Rule Your Retirement.