Teaching Children the Value of Money and Budgets
“Marty (her husband) loves them dearly and would do anything for them and I feel the same way,” says Sarah, “but it quickly became a situation where there was some new crisis with one of the three grown kids every few days.”
In just a matter of six months, Marty and Sarah spent thousands to pay overdue phone and power bills, rent and mortgages. Even with the help, two of the three adult children ended up moving into their father’s new home because they could not afford to keep up their own living arrangements. The one thing Sarah said these kids would not do is give up any of the extras they enjoyed, like impromptu vacations, shopping sprees, and racking up hundreds in cell phone bills each month.
Marty’s kids were not unique among the families they knew, Sarah adds. Many of their friends also admitted they were providing major financial assistance for adult children who often moved home like it was a real solution to an ongoing problem. Sarah cites one friend who has been trying to move her 38-year-old daughter out for nearly five years with no success; the daughter started her own family in this period and they all still live with her mother.
Sarah says she realized then that she would need to do more with their adopted children to help them become savvy about money or they might end up in the same predicament as Marty’s older kids: unable to survive on a budget and dependent on their parents to pull them out of a bind. With this in mind, Sarah began extensive research into the best ways to train their new kids to be money conscious.
“I don’t want them to treat money like all that matters is their bank balance. But I think you do a real disservice to children if you raise them without any sense of cost of living and how to budget. The first time I mentioned the word budget to Marty’s oldest son, he just blinked at me like he’d never heard the term before. He and his sisters were just accustomed to going back to mom and dad to meet every shortfall, so they had no idea that they had to balance their income with their expenses.”
The result of her research, Sarah hopes, will be children who are more financially independent, capable of running not only their own lives, but ready to run a company where the bottom line matters. She also plans to assemble her ideas into a book but is quick to acknowledge that she has learned much from books already out there, such as Neale S. Godfrey’s “The Ultimate Kids’ Money Book” (Simon and Schuster).
She also points to online resources, like the products available from Money Savvy Generation (www.msgen.com) to educate children in becoming more financially literate. She’s also found some help at toy and general merchandise stores like Target.com that stock gifts like a play ATM from YouUniverse that you can fill with real money. Her youngest daughter puts her allowance into her ATM “account” each week and then checks her balance faithfully to see what she has available for purchases.
“Jenji is only nine but already, she’s developing a sense for what she can afford and what things she will need to save and work extra to acquire over time. Henry, my eldest, made and sold cookies over Thanksgiving weekend to help finance the snowboard he wants to buy himself. I think it’s working,” Sarah says.
She also offers these tips to other parents who want to introduce financial literacy to their school-age children:
– make an allowance realistic and consider whether to begin to merge the things you buy directly for children with what they pay for themselves out of their allowance
– beyond what they earn for allowance, think about special jobs the kids are capable of doing themselves and then pay them accordingly
– if your child shows initiative toward earning extra money through his or her own enterprises, support them as much as possible; perhaps hold brainstorming sessions where you help the child come up with ideas and talk them through the pros and cons of different approaches
– as they get older, introduce them to the idea of a clothing budget; Sarah says her children changed almost overnight from being careless about their jackets and shoes to being very responsible with a realization that these items cost real money and how it affects their available money if they must replace lost or damaged apparel
– don’t restrict kids from discussions about household finances and decision making; Sarah says she’s learned from experts that too many parents hide details from children that then makes them have an unrealistic sense about what their folks can afford
– encourage savings, something too few young adults now do, and teach children that one of the uses for savings is to cushion belt-tightening times or pay for unexpected but crucial expenses
– also encourage a degree of altruism so that kids understand that giving to others is also part of life; she warns that children who don’t learn this balance may become too focused on what they have without any appreciation of what others do not have
– don’t rush in to help a child with a financial downfall because it’s important for them to develop a sense that certain fiscal decisions have consequences; she says that just as you wouldn’t give kids a steady diet of candy, you don’t want them to feel all their money is for fun while parental money pays for everything else
On the last point, Sarah is quick to add that this does not mean you shouldn’t aid a child, regardless of his or her age, with a legitimate financial emergency. But if the child accepts your help, make it clear that you also have the right to make suggestions that can help them avoid a repeat crisis.
Sarah feels that the nearly three years they have spent educating their two youngest in finances and money management has already paid big dividends. Last spring, she was asked to talk before the local school’s parents group and Sarah reports she got many calls afterward asking for her assistance in developing programs for other families.
Says Sarah, “Everybody loves our story. Our 11-year-old is already more financially responsible, and certainly has more in savings, than her twenty-five-year-old half sister. And our son is quite the entrepreneur; he has plans in place now for a business he plans to start during next summer vacation. But they’re also balanced; both give to charities and see money as a tool rather than a pursuit of its own.”
