Part II of Kids Don’t Understand Money: TEACHING ABOUT MONEY

In Part I of Kids Don’t Understand Money I shared a story of a parent whose child had not previously seen or paid attention to paying with cash. (Really!) I addressed the reality that children today don’t know about our legal tender:  coins and bills.  It’s shocking to think about. And here is the rest of that story:  The 7-year-old, upon seeing his dad use green money, asked incredulously, “Do you have more of that?”

How do kids learn about money?  Where does it comes from? How do we get it? How do we manage it and make decisions about it? And most important, how do they learn the value of money? Where does their understanding about money come from?

Children learn about money by living life with money, the business of everyday life. They will develop their understanding from watching you and other adults in their lives using money.  And children will learn their money values (as opposed to value of money) from your own money attitudes, too.  These developed from your upbringing and the attitudes about money practiced when you were growing. Your attitudes are a composite of your life experiences. Your child’s will be, too.

As previously discussed, these days real money is not a part of our children’s lives.  Mainly, purchasing happens via plastic and double side clicks. It’s quick and easy. But that ease weakens a child’s experiences with money which directly builds his understanding. Articles abound about the the child who is raised on plastic and clicks. A recent article in Time Magazine,  Why We Overspend, highlights how the “new money” undermines our ability to keep track of what we spend.

Many parents were raised with the belief that “it is not appropriate to discuss money with children.”  That could not be farther from the truth.  Children need to see you in action with money. They will have lots of questions as their awareness, interest, and desire for money grow. And they need to be able to ask questions and get reasonable answers. Remember, no question from a child to a parent is “inappropriate,” ever.

(I am not advocating full transparency with your spending choices and money decisions.  In another blog we will discuss how to answer your child who asks, “How much money to you make?” and questions like that.)

While people value money differently, children’s sense of the value of money develops in synch with their growing understanding of the math concept of quantity, with regular experiences with money, and with learning about different costs, expenses, and prices.  Parents do not really discuss cost in front of their kids, as if it is “none of their business.” I am not talking about braggadocia or “mine is better than yours” conversations; I do not mean disparaging others about their money or how it is spent; I am not suggesting the admonishment of a child, as in “Look how much I spent, so you had better…”   Rather, I am talking about sharing information for purposes of understanding,  learning, and awareness.

I long for the days when parents used to write checks at the end of the month. It was a regular, open activity. ”Don’t bother me, I have to pay the bills.”  Children learned that the check was a promise, and the money came out of the parents’ own bank where their earnings were placed and kept.  Children could see that their parents actually PAID for most parts of their lives.  Do your children know, by the way, that you pay for electricity, for water, for trash collection?… that you pay for medical attention, for house repairs, for the gardener, to say nothing of clothing, food, entertainment, camp, lessons, AYSO?  The list is endless. Children learn how adults use their money, why money is needed and how it is used, from you. Parents and real life at home balance out the likely distorted lessons they receive on the playground, from TikTok, and from their imaginations.

Let’s get started.

TIPS for helping your children to learn all about money.

• Use coins and green money especially with our preschool and primary age children. Don’t rely on their schools to teach this information. They need to see real money in action.
• Talk to your child about where your money comes from. Be simple and direct.   When I taught kindergarten and I asked children where a parent got the money the family used, the common answer was, “From the grocery story.”  (Those were the days of writing a check over the amount in order to get cash.) They had no idea about how it was earned, that real work brings in real money.
• Pay attention to how your children get their money. (Get control of your relatives!) Think twice about leaving lose change around for the taking. Teach them about spending, saving, and sharing when they . (Reference Chapter 9 in my book You’re Not the Boss of Me.)
• Consider an allowance. Chores for pay, aka an allowance, teaches many real lessons: Saving, spending, sharing, choices about buying; choices about not buying.  Some parents feel that life is just too busy for an allowance. More, I am told kids don’t have time for chores; they have too many after school activities. (Don’t get me started.) But allowances teach how we get money.  (For information on how and when to implement an allowance, see page 190 in my book You’re Not the Boss of Me.)
• Be transparent with your money exchanges. Let your children see you paying for a variety of things from your bills to pleasures to donations.
• Talk about costs and compare prices. When grocery or clothes shopping for example, help your children to see how much things cost.
• Let your children see how you make your decisions about what you buy. Help them to learn about items or experiences being worth the cost. Sometimes they are, and sometimes they are not.  Explain your choices.
• Children should not come by their money too easily. Help your child to begin to learn that it is real work that brings real money.
• Mind the amount that the Tooth Fairy brings. Children who get too much do not learn much about the real acquisition of money nor the value.
• At a restaurant when you will likely use a credit card, talk about the cost of dinner. Introduce tipping.  This helps build a baseline understanding of how much eating out costs.
• Open a bank account. Do so WITH child.  You might even find one that offers the child a Bank Book. Otherwise, keep all your deposit receipts together for the child.
   

With older elementary children and adolescents, give them financial knowledge by:

• Do not be the Bank of Mom/Dad.   Just because your teenage child wants money for something, doesn’t mean he should get it.
• Explain the concept of banking and interest.  Include beginning lessons in how loans work.
• Explain credit cards.   They are like loans from a bank that you must pay back each month.  If you don’t, the bank will charge you more money.  It is not an unending fountain of money.
• Teach how credit cards can be dangerous because they give us instant gratification and make us think we have more money that we actually do.
• Explain how debit cards work. Even though they feel like free money, they spend your own money.
• Refrain from keeping a debit card full.  Zero balance is an important lesson.
• Allow want and need to exist. Children need to learn to delay gratification.
• Your credit cards are for YOU! Think long and hard about giving your children your credit card or access to your Amazon and other accounts/passwords. If you do, I promise you will regret it.  In doing so, you promote the idea of “free money.”
• Introduce the idea of a budget, even if you don’t have your own to share.  Children must learn to budget. They need to experience not having enough, meeting a limit, and running out of money, and not  being rescued.  I am a big fan of an old fashioned “clothing allowance” or “entertainment allowance” for kids starting in middle school.
• Teach your adolescent child that you actually pay for Door Dash and such services. It adds to the cost of the meal.  This is especially important for adolescents who grow to expect the delivery of food whenever they want with no regard to cost.

For Middle School Children and beyond:

Beware of “Money Dysphoria” (or “Money Dysmorphia”). As adolescents are exposed to the acquisition of stuff (clothes, accessories, equipment, make up, experiences, etc..) on social media, they are susceptible to Money Dysmorphia— a psychological condition in which an person has a distorted idea about money, belongings, and wealth. It is today’s version of “Keeping up with the Joneses.”

Not only do our adolescents become preoccupied with acquisition, but they can develop the idea that they should have more than they have. In addition, they worry about not having enough. What is missing is the foundational concept of how one actually gets that money that leads her to the stuff she so desperately wants.

Real life experience with handling real money and all the above mentioned tips enable the child’s development of healthy money values and ideas.  They are also an antidote to the development money dysmorphia. Balancing real life with the distortions they are fed on social media is critical.