Busy family life and hectic schedules can make it challenging to teach kids the value of a dollar. Since we all know a dollar doesn’t stretch as far as it used to, sharing that value can be even trickier for parents who often have sticker shock over the price of everyday goods. What’s a parent to do? Follow the advice below to help teach your mini-me the value of a dollar.
1. Encourage saving and giving first:
In the consumer based culture we live in kids are often marketed to, and encouraged to spend, spend, spend. Encouraging them to pay yourself first and give back before you spend can be a huge lesson in the value of money. Once a large chunk of their money is gone they’ll realize how precious a resource it is and be more apt to consider their purchases carefully.
2. Slow and steady wins the race:
Just like the story of the tortoise and the hare-slow and steady wins the race when it comes to building wealth. Showing elementary-aged kids the ‘magic’ of compound interest can open their eyes to how much they can have if they are patient and focused on the long-term instead of the here and now.
3. Teachable moments:
Whether it’s in the grocery store when they have a case of the “gimmes” or when they ask for an expensive new toy or gadget your kids will present you the opportunity to discuss how much things cost, and the basics of budgeting. For instance, when kids are young a great way to drive that moment home is to give them a budget at the grocery store. They can spend a set dollar amount and will learn to read prices and find something in their budget.
4. Give an Allowance:
Use an allowance as a teaching tool to help your children how far their modest budget will stretch. It will also teach them to have patience when it comes to saving money when they want to save up for a big purchase. Conscious spending is a side effect of money management as well. By teaching your kids early on to save, and think through their purchases they are less likely to get into debt later in life.
5. Get them involved:
Teaching kids to give back can help share your values, but it also allows kids to see how fortunate they are when they confront other kids their own age who are struggling with the basics of living. It can create a humble outlook on life which only serves to help them stretch themselves and their dollars further.
6. Make room for mistakes:
Allowing kids the room to make mistakes with their money is a valuable way to teach them the value of a dollar. My (then) 6 year old once saved up diligently and did extra chores to earn enough for a toy he thought looked cool based on commercials and the cool packaging. Once he got it home though he realized it wasn’t all it had been advertised to be. It ended up in the donation pile shortly after. Now he carefully weighs his options before he buys. Teens especially need more ‘rope’ when it comes to their budgets and spending habits. Better that they make mistakes now than when they are living on their own. (see more about teens and money here)
7. Show them the basics of budgeting:
When your kids want to learn-teach them the basics of budgets. For instance our kids have asked how much money we have and we sat them down to explain how complicated adult finances are. We have money in our bank account, in our savings, and investments. We also owe money for our house with a mortgage, and have bills that we need to pay every month.
Understanding the basic family budget will help them understand why you can’t just go and buy an iPod Touch even if you have the money in your bank account. Not comfortable with sharing your finances with the kids? Set up a fake budget for them and show them how it works.
8. Model good financial behavior:
Without a strong role model to keep them on track kids will struggle with these concepts. The same way many parents get physically fit for their kids you should consider getting fiscally fit to show them how to manage money.
What are some ways you learned money habits or share them with your kids?