Yahoo News Teaching your kids the Monetary ABCs
When introduced to our modern financial system, kids are invariably bewildered. It's hard to blame them when ATMs seem like magical walls that dispense cash, credit cards look nothing like dollar bills, and investments…well, let's not talk about investments just yet.
As the current economic climate drives home some hard-learned financial lessons, how do we ensure that our kids grow up financially savvy?
Our goal at BillShrink is to save people - including the very young people, from making financial blunders. To this end, we've assembled seven tips (separated by age) for teaching your kids about money - how to make it, spend it, and save it.
For the wee ones - ten and under:
Counting
Lay out different monetary denominations - $1, $5, $10, $20 bills, and all the assorted coins. Explain how they relate to one another. For instance, a $20 bill is equal to four $5 bills, or 80 quarters.
If your child's math skills are advanced enough, you can play cashier. Kids are often excited to emulate grown-ups, making this an easy way to practice math skills.
Money Translated Into Candy
A $5 bill is just a piece of paper, after all. You can demonstrate to your child the value of $5 by giving him or her $5 to spend at will. Discuss what $5 will net: candy, clothes, games, etc., and reinforce the relationship between the bill and the tangible object. The bill itself is worthless, but it can be exchanged for something your child values.
For those of us that live in states with high taxes, this is also a great opportunity to point out that five dollars may not be enough to buy a toy selling for $4.99.
Break Down Allowances
If your child receives an allowance, dole it out in denominations that encourage saving. For example, pay out a $5 allowance using single dollar bills. This way you can suggest, for instance, your child use $3 for candy, $1 for soda, and $1 for the piggy bank.
Older and wiser - ten and over:
Play Monopoly
The most successful board game in American history, Monopoly is great for introducing your child to many different financial issues: mortgages, investments, income taxes, utility bills, and, of course, monopolies.
Smart Shopping
The next time your child wants an object retailing at a grossly inflated price, show him or her how to comparison shop by visiting a comparable store (CVS vs. Rite-Aid, for instance) and checking websites online. There's a hidden bonus lesson in here on delayed gratification.
Savings Account
Open up a savings account in your child's name and track it periodically to demonstrate how interest accrues. Calculate how much money will be in the account when your child is 18.
Even better, check to see if your bank offers savings accounts geared specifically to kids. These savings accounts typically come with lower minimum balance requirements and free furry little toys.
Credit Cards
Plain and simple, show your children your credit card statement. Point out that you're accountable for that $50 trip to the zoo three weeks ago, and calculate how much extra money you'd have to pay if you paid only your minimum balance each month. Credit cards may still seem magical to them, but at least you've opened the dialogue.
The Tricky Topic: Investing
In an age when 53% of Americans admit they lack a basic knowledge of stocks, bonds, and mutual funds (Financial Finesse 2009), how are we supposed to explain investing to our kids?
You might introduce your kids to the stock market by selecting a stock of a brand they know - Coca Cola, Ford Motor Company, or the Hershey Company - and tracking it. Ask your child questions about what they think - will people be buying more chocolate this year? Or, take those stocks and calculate how much you could have made if you had invested $50 when you were your child's age. (You can also point out that investing is a double-edged sword by looking at a stock that tanked over time.)
For the brave…let your child select a stock to purchase. Who knows, you may have a budding investor in your midst!
What do you think of these tips? Will they, or have they, worked with your child?
For more shrinkage, see:
The Best Credit Cards for the Holidays
Men vs. Women: Financial Planning
The Best Times to Make 14 Major Purchases
10 Simple Tips to Master the Art of Haggling and Savvy Shopping
