To celebrate the beginning of April’s Financial Literacy month, I thought I would create a series of blogs about money & financial literacy. I am starting at the beginning, when kids are young & will continue through some of the older ages & stages of life.
Part 1: Kids learn by what they see, hear, & do:
When my niece, Ali, was 4, she used to think money came out of a machine. It made sense, she saw her Mom do it. If you want something, you just go to the machine, get the money, & go to the store. If we don’t tell them any different, kids believe what they see – money comes from a machine.
Little ones quickly learn that they need money to buy things. They need to be taught:
- You earn money by working
- You deposit the money you earn in a bank to keep it safe
- You have to have money to pay for things you need – a place to sleep, food to eat, clothes to wear, maybe, even a car to go places
- You use money you saved in the bank to pay for things you need
- There is a difference between needs & wants – needs come 1st
- You usually have to save money to buy something you want
Kids learn from what they hear. Do you speak positively or negatively about money?
Most of us know that kids are like little sponges & pick up on things they hear & sometimes they repeat us to our surprise (or shock): “We don’t answer the phone at our house, it might be a bill collector”. As adults, we need to be careful with our words. We also need to pay attention to other places that kids can learn by listening – TV, video games, radio, private & public places.
In today’s digital world there are so many ways to educate our kids about money; we can play fun songs for them to hear and maybe learn. One of my favorites is Sammy Rabbit; hIs dream big campaign teaches great money habits for young children. You can learn more about Sammy at http://www.dreambigday.net or sammyrabbit.com.
Kids also learn by what they do. Teaching kids to be financially successful in life should begin early. The Davidson Institute reports that money behavior habits can be formed by age 7. When we are young, it is hard to learn that we can’t have everything we want. Parents can help by creating incentives & providing rewards.
- Have kids write goals & create visual savings charts for something “they want”
- Tell them that writing goals down increases their chance of success
- Practice “learning by doing”
- Money earned or received can be divided into 3 groups – spend, save, give. Let them decide where to give.
- Teach “delayed gratification” – this will provide a great leap forward to becoming financially capable & successful, later in life
- The concept of “budget” can be taught with things other than money; i.e. 1 sugary item per day – they choose when. I used to tell my son, Jason, if you want sugar on your cereal in the morning, then please don’t ask for a cookie or something else later on in the day. He frequently decided to wait because he did not know what other choices there might be later. Till this day, he still does not care for sugar much and he learned to wait for what he wants. He also works for it.
If you want to teach your kids a little about saving money, tell them that one of the best things they can do with their money, is to save it. Start early & save often. Even a little bit saved, on a regular basis, can add up to much after time. It is like planting a seed and watching it grow. Money can do the same.
A Chinese Proverb is “Learning is a treasure that will follows its owner everywhere”. Learning to make smart financial decisions when you are young will also benefit you for life.
Have fun teaching & helping others learn to make smart financial decisions. Thanks for reading.
Deborah Ann Fox, CPA is a financial literacy advocate who devotes part of her practice to helping others make smart financial decisions by providing education while building client skill levels. She is available for one on one, local, or remote appointments. Free 30 minute consultations.