There is an old quote of undetermined origin that goes, “Tell me and I forget, teach me and I remember, involve me and I learn.” When it comes to financial literacy for children, positive habits are the key to teaching lifelong lessons. I rely on this truism to present to people of all ages as an Accredited Personal Finance Instructor℠ and in my daily work with teens and families as a librarian in Columbia, South Carolina.
Consider using some of the lessons below to train up the savvy money movers of tomorrow.
1. Add Up Grocery Items Together
This activity is a little bit like having your child notice traffic signs, except it’s noticing prices. The key is to stick to a budget and ask your child to keep a running tally of the total price.
My own parents did this with me, and the practice gave me an appreciation for the value of a dollar. I also learned how taxes kick in during checkout.
As groceries are added to the cart, ask if there is a cheaper alternative that could save a couple of dollars. You might also add an incentive, such as, “If we keep the grocery bill under $100, we can buy your favorite flavor of ice cream.” This activity can start as simple as your child enters grade school and become more complex as they enter their tween and teen years.
2. Offer an Allowance
The most direct way to involve a child in many financial concepts is to let them use some money of their own. Payment can take the form of a flat amount paid each week or month, as well as a bonus paid out for “extra consideration” for tasks that exceed the norm. Even a small allowance in youth establishes a direct relationship with money, one that may grow with age-based raises or as one child shows greater initiative than their siblings.
The major pitfall to avoid is letting the acquisition of money motivate everything a child does. If you decide to pay an allowance, then your child needs to know the expectations for receiving one and that they are different from their regular duties as a member of the household. For example, taking off shoes before coming inside could be an expectation, whereas vacuuming the floor once a week could be a chore.
As an aside, my grandfather paid me a bonus for the A’s on my report card. According to NPR, he would have been more effective tying money to specific activities like reading or completing homework, but I wasn’t complaining.
3. Use Three Envelopes: Save, Splurge, Donate
Once a child has some money in their pocket, the real lessons begin.
With each windfall, have the child add money to three different envelopes, labeled Save, Splurge and Donate. Having a long-term or expensive purchase to save toward in the future is a powerful lesson in patience and delayed gratification.
The splurge envelope is for a short-term experience, like a movie ticket or summer snow cone.
The donation envelope requires the child to choose a cause important to them. You can use sites like GuideStar or Charity Tracker to find a nonprofit with a clean track record.
4. Modeling Delayed Gratification
How does delayed gratification work beyond telling a child not to spend money? What good is a “savings envelope” if a child would truly rather splurge it right now? Model the behavior you wish to see.
Give an impulsive purchase 24 to 48 hours before deciding against it. Use big, visual reminders like an illustration on a dry erase board or freezing the money in a block of ice. When the time expires, talk through your thought process out loud and decide not to spend the money.
In a world of same-day delivery and “Pay In 4” financing, this is a good example to set. Remember, it’s not about denying pleasures, it’s about being true to yourself.
5. Play Board Games
Board games can still provide a solid night’s entertainment, especially with some added snacks. Monopoly is still good for adding, subtracting and making change, but there are plenty more options, too. Good tabletop games can help build a child’s creative, risk-taking and competitive skills without having to wager actual money. Think of these games as training wheels for future wallets.
Machi Koro, which I like to call “Monopoly without a board,” offers much more strategic variety and unique situations. Pay Day and Life tie realistic life events into a board game experience, teaching as much as they entertain. Catan is a game of resource management and shrewd trading, skills worth developing for adult decision making as much as winning bragging rights at game night.
6. Spend With Purpose
Everyone has a money mindset. Some people gained their money mindset on purpose, others by coincidence. It can come from a friend, a family member or just a core experience.
Ignoring the topic of money around children only ensures that you have less control over how they get their money mindset, and it could hold them back well into adulthood if you are not careful.
There are many reasons someone could have a difficult relationship with money, and anyone who’s ever been broke has yet to forget about it. Nonetheless, it is important to be honest with children about building good habits around money, and that requires being honest and kind with ourselves, too.
It is worth explaining clearly and repeatedly that spending and saving money are merely means to an end. Going without some things to save money allows people to spend money on what really matters to them, which usually turns out to be experiences. Money as a tool can be as big as a water park or as small as an ice cream sandwich from the corner store. Both are fine ways to beat the South Carolina heat with a loved one.
These are just a few methods for teaching young people how to handle, use and save money. Using awareness, play, integrity, demonstration and honesty to teach these lessons will ensure you pass on lessons worth keeping for a lifetime.
Thomas Maluck is a youth services librarian and Accredited Personal Finance Instructor in Columbia, South Carolina, with over 16 years of experience working with families and helping people make sense of money. You can visit his website at financialflock.com.
