It’s too bad that some of the most critical skills that your kids can learn usually aren’t taught in school. Learning how to handle money counts as one of them at least in most schools. Therefore summertime represents the perfect time for you teach your kids some lessons in finance. Fortunately, there are steps you can take at almost every age that will help them develop as smart money managers. Here are a few ideas to get you started as you progress through the summer months.
1. Start Young
Don’t know how you can teach your pre-schooler or first-grader about money. An article on Parents.com suggests some very practical things. First ask them to choose which coin they’d like to have, giving them a penny, nickel, and dime. Chances are they’ll choose the nickel, because of its size. Or ask them to choose between 10 pennies and a dime. Again, they’ll probably choose the pennies, because there are more of them.
Showing them the real value of each of these coins and working with them until they understand represents some first steps you can take with your children when they are small. And you can add a bit of fun to this by playing restaurant or grocery store with them. “Price” the items in the store and teach them with the coins how much that is. Since they’ll be at home more, this counts as a fun way to use playtime as a learning time.
2. Show Them How To Budget
Showing your kids how to budget may mean a couple of things, depending upon how old they are and where they are in the process. Teens can sit with you as you budget or go with you as you shop for groceries and other household necessities. If you can pay with cash, all the better. They see how the budget on the paper gets played out in real life. As financial guru Dave Ramsey suggests on his blog, you’re the example. Your kids will eventually treat money like you do.
3. What to Choose?
This is a corollary to the first entry. It’s one thing for kids to see how far your money goes. It’s another thing to see how far their money goes. If they get an allowance, show them how to spend it. That isn’t to say that they should spend it all. Rather if there is something they really want, make them buy it. Better yet, if there are two-somethings they want, make them see what it’s like to have to choose between the two if they only have money for one. This helps them develop their financial decision-making muscles.
4. The Waiting Game
Kids often want what they want and they want it now, depending upon how old they are. However, Forbes suggests that teaching them how to wait for what they want is a valuable lesson. For example, if they earn an allowance of $10 a week, and they want a $70 bike, they need to see that this will take them at least seven weeks of savings to buy it. This waiting game counts as one of the most difficult lessons in money to learn, according to the article, one that’s even difficult for adults. The earlier they learn it, the better. It’ll be a instilled as a habit long before they have any big-time spending power.
5. The Family Yard Sale
If you hold a yard sale each summer, put your older kids in charge of it. Ask them to tag each item, to run the cash box, and to deal with their customers. Not only does this give them organizing skills, it teaches them about negotiating and about how to handle money.
The summer is a good time to teach your kids about money, because you’re home with them more. Taking them grocery shopping with you or putting them in charge of the family garage sale count as just a few of the ways they can learn how to budget their money. However, it’s important to keep in mind that there is no one way to teach kids about money. These five steps are only the beginning. Financial literacy comes from a variety of experiences, each building upon the other. What they learn in the summer should carry over to other lessons throughout the year.
David Milberg is an investment banker from NYC.