Tuesday, May 24, 2011

Starting Young and Moving through the Teens with Money

Talking about money seems to be a taboo subjects in many homes, but it need not be so.  

Talking about money will be as natural for our children as we make it.  

Start young and keep it simple.   

As young as two, or whenever you know the money won't end up in a mouth,  kids can start learning about money by actually handling it and learning what each coin is called.    A penny is one cent.   A nickle is the same as five pennies.   A dime is the same as ten pennies or two nickels.

This is also a good time to start instilling your values about money.    Think about what you do with your money.       How much do you save?    How much do you give to charity?   How much do you feel is appropriate to spend on just yourself?    How much do you share for family obligations?   It's never to early to share this information with children.   They may only have a dollar, but that's enough to split up into spending, charity, long term savings, short term savings, and what ever other categories you feel appropriate.

I've found that when kids are young it's good to have them physically place money in containers. When our children were younger, we utilized an envelope system.   Everybody had a large manila envelope that smaller envelopes fit into.   These smaller envelopes were labeled with our money categories: long-term savings, short-term savings, tithing, spending, and family activities.   A favorite past time was getting out their envelope, counting the money, recounting, and just feeling those coins in their hands.    Trading coins for bills as the amounts in the envelopes grew were pure magic. 

Playing games involving money is also a great way to practice budgeting on a larger scale without the risk factor real money holds.  Monopoly, Life, and many other classic games involve counting money and budgeting.   Another game that specifically requires the player to think ahead and budget is Budget .  Before each round the players must plan a  budget of  what they will spend until next payday.  If they stay within their budget, a bonus is coming their way next payday.   I like this game because of the amount of money the child works with, $2000, as well as covering real life situations and expenses, renting vs buying a home, doctor's bills, investing vs short-term savings, groceries, buying a car, car repairs, brand-name clothes vs thrift store finds, ect.

A similar game, Payday,  uses a month-long period as its base for budgeting.   I'm not as thrilled with this game because of the luck factor involved.  I am morally opposed to gambling, and this game involves playing the lottery and winning jackpots. Guess I should have looked at the description a bit more before buying which was an opportunity to have a discussion about money with my family!   Never miss those opportunities--even mistakes on our part can be learning times for our kids.  

About the age of 12 we transfer the long term savings from the envelopes to a bank account.   I remember growing up having a bank account with an account book.   I lived in a small town, and the little bank in our town was locally owned.   Someone from the bank came to my school and met with my class.   With $1 we were allowed to open our very own savings account,  and we were welcome to come into the bank with our grubby hands full of coins to deposit into our own account.  The teller would hand-write the amount we had put into the bank and then stamp it with the bank stamp.  

Oh how times have changed!    When it was time to open an account for our oldest we had a hard time finding a  bank that would open an account for him without a large minimum amount and without a parent as the official account holder.  Fees were also a deal breaker for most small savings accounts.  I finally located a local credit union that was willing to open accounts for children--even if the parents weren't members.  The minimum amount necessary to open a children's account was $25.   My experience with them was fabulous; they were willing to work with children and even excepted those grubby handfuls of coins.   I would recommend looking at local credit unions to see what services they offer for children.

If you can not find anything local that fits your needs, you may want to look at this online option, ING Direct. This account  does welcome children's accounts with a joint adult account holder.  The account is easily accessible and has wonderful online tools to watch money grow without the fees or high account minimum. 

Around the age of fifteen we opened a checking account with an ATM card for our oldest.   We deposited money in the account each month requiring him to pay for expenses such as school books, lunches, dentist appointments, and clothing.   With careful planning he was able to have a little extra for fun activities.   Mistakes have been made, overdrafts have popped up and lunches have been missed, but I would rather he make these mistakes on my watch with small amounts of money then make them later in life with larger amounts of money and bills such as a mortgage or car payment. 

There is no escaping the influence money has on our everyday lives.  Let's be pro-active and teach our children our money values instead of letting the media and others teach their money values to our children.

This is the second part of a series of posts about teaching about money.   Be sure to check out last week's post   and come back for next week's post about curriculum resources I've used to teach economics.  

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