I know how to teach kids about money.
That may sound simple, but parenting is fraught with difficulty, and there are few things I can say for sure I did really well as a parent. Teaching my kids about money is one of those few things.
One of the best things about teaching and parenting gifted children is that they can often analyze ideas earlier than their peers, making discussions about money rewarding (and often quite rambunctious).
Frankly, it doesn’t matter how well they learn what they’re taught at school if they aren’t taught how to handle their money at home. Over the course of a lifetime, our children will likely earn literally millions of dollars, and if they can’t manage it, they may as well not have earned it.
If you’re a teacher, many of these ideas are easily integrated into the normal course of the day. We all have those moments when we’re just chatting while standing in line, waiting for something or other, or when the content lends itself to those micro-lesson opportunities.
So here are some tips for how to teach kids about money that I’ve learned over the course of parenting my own children.
1. Involve them.
We are comfortably middle class now, but when the kids were little, we were living on $26,000 a year for five people. Yep. You read that right. And that wasn’t that long ago, actually. I can pinch a penny until it screams for mercy.
When we started encountering Jonesitis (that nasty infectious disease when your children see that other kids have things they don’t), we sat the kids down for a family council.
We took Monopoly money equal to our monthly income and put it into piles according to spending categories. We had a little bit left, and asked the kids what we should spend it on. They got a voice, and they also understood that there was a budget for groceries that, if overspent, meant the money had to come out of another budget.
Some parents don’t like their children to know how much money they make, and that’s a personal decision, but I found that too little information was far more dangerous than too much.
Caveat: Gifted children often have strong intuition and may pick up on parental anxiety over money. It is one thing for kids to know that money is a finite resource; it’s something else for them to be scared there will not be enough money for food.
2. Give them real control as soon as they’re ready.
When our children began 7th grade, they were given a budget for school clothes for the entire year. I can still remember their sitting at the kitchen table with the Sunday ads from the newspaper, pouring over them to find the best bargains to make their money stretch as far as possible.
When we were on vacation, we gave them a certain amount for treats and souvenirs. We never dealt with the neverending begging for every little thing. They knew how much they had, and they learned to spend it wisely. Were there regrets? Yep. Were there disappointments and poor choices? Yep. We felt it was much better to have those regrets and disappointments with small amounts of inconsequential funds than with their rent money.
Making money real is so vital that this economist used a boat load of cash to prove it to his kids.
3. Give them responsibilities not tied to money.
All of children received allowance, but they also had “Citizen of the Household” responsibilities that were not connected to money. They are things that we all do because we live in a house together.
When kids feel like they do chores in exchange for money all of the time, they can decide that they would rather not have the money than do the chores. That’s not a great situation, trust me.
4. Help them understand the time value of money.
Money is typically earned in exchange for time spent away from the family. Even those who work from home need to focus on the work, not the family. It’s important that kids understand how money connects to that time.
It’s an effective technique to ask, “Is that worth mom/dad spending two hours away from us?” Sometimes the answer is yes, of course, but sometimes the answer is no.
5. Lead by example.
Kids (especially gifted kids) can detect hypocrisy from miles away like sonar. If you’re trying to teach them to be good managers of their money, but you are out of control like a financial Spirograph, guess which guidance they’ll follow?
It may sound impractical, but my husband and I are strong believers in the avoidance of debt. We have consistently shared with the kids cautionary tales of credit card misuse, the danger of debt in general, and planned for how to pay for college without debt (three kids, three degrees, no loans).
“Do as I say, not as I do,” doesn’t work with this. Or anything, really. Shame, that.
6. Pay them what they’re worth.
It’s dangerous to overpay kids. When they earn ridiculous amounts of money, they develop an unreasonable expectation of their own worth. They become unwilling to work for reasonable wages, and this can disincentivize work in general.
Those are things we’ve done to help our kids handle money well.
What have you done to teach your kids about money?