Reach Your Financial Goals!

Talk to Your Children about Money

At what age is it appropriate to begin to teach kids about money?  Is it at the pre-school stage, at the pre-teen or at the teenage stage?

The earlier the better if you ask me.  From the time a child is able to count to ten and appreciate nursery rhymes and children’s stories, the time is right to talk about money.  Talk about what things cost and the importance of choosing wisely when spending one’s money (choosing needs as opposed to wants) since one would not have all the money to be able to buy everything. 

Certainly, the discussion would have to be age-appropriate, so parents should begin with simple concepts for young children and then deepen the conversation as children get older.

Consider using nursery rhymes to jump start your discussion with younger children:

SIMPLE SIMON MET A PIEMAN 

Simple Simon met a pieman,
Going to the fair;
Says Simple Simon to the pieman,
Let me taste your ware.
Says the Pieman to Simple Simon,
Show me first your penny;
Says Simple Simon to the Pieman,
Indeed I have not any.

THE OLD WOMAN WHO LIVED IN A SHOE

There was an old woman who lived in a shoe
She had so many children she didn't know what to do.
She gave them some broth without any bread,
Then whipped them all soundly
And put them to bed.

As parents, we engage our young kids in reciting nursery rhymes and we focus on their memorising the verses and appreciating the rhythm of the words.  But have we realised that stories like these provide simple yet instructional platforms to talk about a) the cost of goods, b) that one must have money to acquire those goods and c) parents do not have unlimited money to afford everything that a child may want?

Parents can use such nursery rhymes to introduce discussions with their little ones on the cost of food items that the child eats – bread, milk, cereal, juice, fruits, ice-cream, sweets, chips, cookies. Let the child know that mommy and daddy sometimes do not have money to buy all the stuff that the child wants.  Additionally, parents can discuss with their little ones the importance of spending wisely i.e. buying the goods that are really needed and foregoing items which one may want but not really need, and living within one’s means.    Introduce words like “afford”, as in “I cannot afford”, and “budgeting” - identifying the items that money will be spent on each month.  Make budgeting a family affair and involve the children.

Parents should strive to make discussions about money, fun for children by           incorporating them into games.  For e.g. when parents come home from the supermarket, they can ask their young children to identify the goods     purchased and then ask them to guess the price of each good.      Parents should give hints along the way - “go higher or lower” - to guide children to the right answers.  This enables children to understand the cost of goods.  Then explain to them how mommy and daddy     obtain money to buy the goods that the family needs.

I have made a habit of giving my daughter, since she started grade one, the supermarket receipts.  On the way home from the supermarket I engage her in conversations about the prices (numbers) she sees listed on the   receipts.   We discuss the prices I paid for the recently purchased goods.  So when I tell her I do not have $7.00 to buy that tin of Pringles because I have to give her money for lunch each Friday, she gets the message...if mommy buys the potato chips I won’t have money for Friday lunch… spending money on lunch is more important than spending it on snacks.

Introduce also, into the discussion, the importance of buying food items that are needed to ensure good nutrition and foregoing those items that are not nutritious even though one may want and like those items.

It is important that parents let children know what goods cost and the value of money.  Many times one would hear a parent berating a child; “Boy do you know how much money I am spending on you to send you to school and you are forming the fool”.  If the child were to answer truthfully, he would say “No mommy I do not have any idea, because you never discussed this with me.”  However, the child is smart enough to keep his mouth shut and avoid punishment.  

The truth is many of us do not discuss specifics about money with our  children – like the price of the shoes we just purchased for them to go to school, or the cost of the school books and uniforms or the school fees.  And when we do, this information is often introduced in anger, when we are berating our children.  Hence the opportunity to have a calm and instructive discussion about money with our children is lost.

Also discuss with children, including your young ones, what are the goals of the family, and then show how money is being put towards those goals.  For example, say to the child:

 
– We want you to be the best that you can be and that means having a good education so that is why we spend $300 on your school books and $50 on your school shoes.  We expect you therefore to do your best in school, study hard, pay attention to the teacher and do your homework.  We also expect you to care those books and shoes. 

- We want you to be healthy so we spend $200 each week on fish, chicken, fruits, vegetables, eggs, cereal, and milk to ensure that you can have meals that are good for you. 

- Our goal is to own our home so we are saving $300 each month so that we can amass the $10,000 required as the down payment.

Show your children the monthly household bills – telephone, water, cable, electricity.  Talk to them about why they should turn off the tap when brushing their teeth to reduce the water bill, or why they should turn off the lights when leaving a room to reduce the electricity bill.  Set a goal to reduce the electricity bill the following month by ensuring that all lights are turned off in rooms not occupied and each month see if the family achieved the goal. Make it fun and enjoyable so that kids would not only understand but enjoy the lesson.  Design a jar and charge a cent for children and a dollar for adults each time a family member leaves the lights on. Lessons are best taught when they are enjoyable.

Also let children know the value of making wise spending choices. At six years of age, my daughter came to me one day and said “Mommy can I have a MP3 player?...all the kids in my class have one.” 

I responded, “Mommy does not have any extra money to buy a MP3 player because she has to have money to pay for your music lessons, and to put aside as savings for your college fund.  However if you really want the MP3 player I can save your Friday lunch money for four months and then buy the MP3.  You however would have to go without lunch each Friday for four months. The choice is yours, food or a MP3.” 

She replied “Okay mommy, I choose the MP3 player”. But a few seconds later she turned back and said.  “Mommy, you know what, I’ve changed my mind, I don’t need the MP3 player but I need food to live.” 

Silently I breathed a sigh of relief.  I did not have to enforce ‘no Friday lunch’ for the next four months to prove my point.

When all is said and done however, the best instructions we can give to our children about money is not what we say but what we do.  Our children are like sponges, they absorb everything that they see us do.  So we have to reflect on our money habits and ask ourselves, ‘what lessons are we giving our children?’ 

Remember, monkey see, monkey do.  Let’s make it a priority to provide good instructions to our children about money.  It just makes sen$e!

 

This article was written by Sybil L. Welsh, Sybil is an Adviser at the Eastern Caribbean Central Bank.

Article Source: Your Financial News June 2010 issue, pp 5-7.
Your Financial News is a monthly newsletter published by the Eastern Caribbean Central Bank.
Current and past issues of Your Financial News are available at http://www.eccb-centralbank.org/PublicAwareness/save2.asp.