Money makes the world go round. At least that is what they always tell us. In this modern age, just about everything we do requires us to use or at least think about money. This is not a natural instinct. Money management is a skill that needs to be learned intentionally.
Unfortunately, in most schools, and even among homeschoolers, personal finance is one subject that we tend to neglect. Sure, we teach them how to count coins and dollars. We give them math lessons asking them how to figure the cost of things. But this is just the most simple part. There is so much more that needs to be taught.
Here are 5 money management tips for children:
- Start young
- Do price comparisons at the store
- Make a mini-budget with them
- Include them in the discussion
- Be open & honest about your own mistakes
Think back to when you first went to live on your own. What is the one thing that you wish you had been taught? What is the one thing you felt most lacking? When I left school, I could read the most difficult book in literature. I could even teach English to a large group of students who were learning the language for the first time. But I could not budget.
My strengths have always been in the humanities, specifically literature. I loved to read. I loved the English language. I loved the arts as a whole. But because I had spent so much time among these subjects, I tended to ignore others like math and science. I did what was required of me and that was it.
In my homeschool, it is the same. Charlotte Mason teaches with the principle of living books. And when we think of books, we tend to think in terms of literature and history, not math. But just because our minds do not think of math in terms of books, it does not mean that we should not be learning in the same way. In fact, in order to succeed in society, we should be thinking of math in terms of a living subject.
Math is not just about numbers. It is not just about formulas. It is a process, a way of living. We need to know how those numbers work in our life on a daily basis. Of course, I don’t recall ever having to refer back to the Pythagorean theorem when walking down the street. Maybe you have.
But I have needed to know how to make quick calculations while standing in the line at the grocery store to make sure that I had enough cash to cover the cost.
I have needed to know how to do averages when figuring out a monthly budget. Salaries are very rarely exactly the same from month to month. Or bills for that matter.
And I have needed to know how to round numbers up and down to get a rough estimate of what I owe any given month.
As an adult, I have needed to know how percentages work. This one was a tough realization. After getting screwed because I took out credit with an interest rate of nearly 20% and then only paying back the minimum every month, I basically lost thousands of dollars. I kept paying and paying and paying. And the money I had actually used from that account had been paid back at least 3 times before I realized my mistake. This is a lesson that hurts. Especially when you are already struggling to make it to the end of each month.
So what do we need to do to teach our children money management?
1. Start Young
It is never too young to talk to your kids about money. It is such an important part of daily life that they should be aware of its existence. But they should also know the circle the money travels.
Children notice early on that someone in the family is often leaving for work. Whether you work outside of the home or at home, I highly doubt any of us do not require a monthly income. As soon as your child notices, you should explain why. Just a simple statement of work meaning paycheck.
It is then a simple step to explaining what money is and how we use it. Bring them to the store with you. Let them see how you give the cashier money for groceries. I even let my young children lay the money on the counter.
This way they see the physical exchange of money for goods and when you explain that it is Daddy’s job that gives him this money, they start to see how it goes together. This is the first step in teaching your children money management.
2. Do Price Comparisons at the Store
Since you are already including them in the shopping, show them how things are priced and how you can get more by paying attention to prices.
Give them a sheet with a list of some items and have them see if they can find the cheapest one. Make a game of it. The person who finds the first cheapest item then gets to choose who will find the next one. Continue until you have reached the end of the list.
Now go back and have them look for the most expensive of each item. When you have finished the two lists, find the totals and compare. Let the children see what a difference a few pennies can make when added up. And it is a great lesson in money management.
3. Make a Mini-Budget With Them
I know that there is a lot of debate about making your children earn an allowance. However, I highly recommend it. As soon as you have begun the lessons in school involving money, I would begin giving them a “salary” for chores.
This ties in with the discussions you have been having about work and how we get the money we use at the store. By doing their own work, they are able to see that money is something that needs to be taken care of because to get it usually requires doing something unpleasant but necessary. It helps them to understand what it requires of their parents to make it available to them.
To help them understand it even better, you can have them create their own mini-budget. By doing this they can see how the relationship between credit and debt really works. As they get older and their allowance grows, they can learn how to budget for even bigger things. Once they are old enough to have a part-time job, budgeting their own expenses should be easy.
4. Include Them in the Discussion
I do not expect the children would want to be present for every discussion you may have with your husband about money management. We all know how boring that can get. Especially if they do not understand fully the concept yet.
However, whenever there is a potential change that will affect them (like the loss of a job or more happily, a rise in the family income), they should be aware of it. As much as we may want to shield our children from the more unpleasant parts of life, it is actually doing them a disservice.
In fact, given the chance to be included, many children will even rise to the occasion. My children once offered me the coins they had been saving for the summer yard sales when we told them that money would be tight that month. They were keen to help in whatever way they could.
We are stronger as a family unit when we are fully able to support one another. And we can’t do that unless we know what is going on. After all, we want our children to feel free to come to us with their problems and concerns. They will be much more likely to do so if we model that same behavior with them.
Of course, I do not think they always need to be aware of every single detail. Especially as we consider how complicated finances can be. However, being aware of how money management affects decisions in their daily life is extremely important.
5. Be Open & Honest About Your Own Mistakes
This is another problem we often have with our children. Again, in the interest of shielding them from difficult subjects (and maybe from our own shames), we can actually do more harm for them in the long run.
If your children think that you have always been great with money, then they may be more likely to hide their own mistakes out of their own shame. They may not want to disappoint parents who have always had it figured out.
On the flip side, if they think any financial problems have been always been the fault of other people (incompetent companies, a mistake at the bank, somebody “out to get them”), they will also be less likely to take responsibility for their own failings. And we all know how necessary that is in fixing something.
By letting them know of your own past mistakes, not only will they learn that you are, in fact, human, but they will also be reassured that these mistakes can be fixed. And they will be ready to learn money management from you.
I don’t know about you, but I’m more likely to take advice from someone who has failed spectacularly but fixed it than someone who always did it correctly. After all, those people know exactly where I’m coming from.
Money management is one of those subjects that is often overlooked. Both in schools and homeschools. But it is extremely important that we begin this education right alongside all the others deemed so necessary: reading, writing, and arithmetic. With this knowledge in hand, our children will do much better managing their money than those of us who had to figure it out as we went along.