Money Fundamentals for Kids
Parents with school-age children are filling in as teacher more often these days due to COVID-19 and distance learning. Why not add a few lessons on money fundamentals while you have a captive audience? Here are five simple lessons on “dollars and sense” that can help kids develop a financial foundation.
Lesson #1: Money isn’t free. Children may have limited understanding of where money comes from. They may not realize there are limits to the amount of money that is available for things they want. Tell them that money is a byproduct of work, and that there are limits to its supply.
Lesson #2: Don’t spend what you don’t have. It will probably come as a surprise to kids to learn that when money is borrowed in the grownup world, the borrower has to repay more than they borrowed! You can also point out that if everything in their piggy bank is gone, they won’t have money left for other things they may want or need at a later date. Talk with older children about the risks of overspending and credit history. A poor credit history due to youthful money mismanagement can harm their ability to get a car or home loan down the road. Bad credit can even affect employment.
Lesson #3: Spend thoughtfully. Help your kids learn to be deliberate with their dollars. They can practice smart spending by answering these three questions about hypothetical purchases:
• Can I afford it?
• Is it worth it?
• Will I regret it?
This framework of questions gives kids the power to make better spending choices.
Lesson #4: Get in the habit of saving. Show how much easier it is to save when its done regularly, even in small amounts, and that savings can help meet larger goals. This can be demonstrated with simple visual addition problems on paper. Don’t forget to mention the other crucial role of savings for adults —as protection when work is interrupted or an unexpected expense occurs. Older students earn extra credit with a lesson on compound interest.
Lesson #5: Money deserves respect. Teach your kids to handle their money with care. That means not stuffing dollars into pockets or leaving change at the bottom of a backpack. Currency kept neatly folded in a wallet or change purse shows respect for the value it represents. The same applies to debit and credit cards, which are as good as money. They too should be guarded, especially to prevent them from being lost or stolen.
Follow your own advice and be a good example. Just as you are a resource for your children, your financial advisor can be a source of financial knowledge for you. Keep your own finances on track with regular financial reviews and you’ll be even better prepared to engage your kids in meaningful conversations about money.
Ziyah Esbenshade, CFP®, APMA®, CRPC®, is a Private Wealth Advisor and Senior Vice President with Pell Wealth Partners, private wealth advisory practice of Ameriprise Financial Services, LLC in Rye Brook, New York. She specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years. To contact her, visit pellwalthpartners.com, call 914.253.8800 or visit our office at 800 Westchester Avenue, Suite 300, Rye Brook, New York 10573.