Let’s face it. Teaching kids about money seems hard. It isn’t nearly as exciting as learning about the latest and greatest video game on the market. As a matter of fact, most kids only want to talk about money when they want to SPEND YOURS.
But it’s really important to teach them. No one ever plans for their child to grow up and be broke, or lack money management skills. But it happens every day.
Every time you go to the store, you probably have to discuss with your kids how they can earn money to buy the things they want, or you finally just break down and buy it for them. This only teaches them that if they “wear you down”, you will give in. When they become adults, however, no one will give in to them like you did. They need to learn about how to use resources wisely.
We want to teach our kids to be good stewards.
Good financial stewardship is a fancy way of saying being responsible with money. If we can teach our kids to do 4 things wisely with their money (Spend, Save, Give and Invest), then we can set them on a course to become good stewards when they grow up.
The following is written to your kids. It’s a resource to help you get started teaching them about money. Work through it with them. Change the examples with with topics relevant to them.
Spending is sometimes the easiest thing to do with your money, and sometimes it’s the only thing people do with their money. Then, later they need money but might not have it. Spending money should be set aside for less expensive things – like a new deck of Pokémon cards, candy, etc. What is considered expensive or less expensive will be based on how much money you have. But, spending money should be easily accessible so that it is available when you need it.
Sometimes you will not have enough money to buy what you want and will be tempted to borrow money. Remember you can only spend the money YOU have. If you borrow money, you have to pay a fee (more money) called “interest” to whomever you borrow it from. It is better to wait to buy something until you have all the money you need (we will talk more about this in the SAVE section).
You also may be tempted, if you do not have enough spending money, to take money out of your savings. Before you do this, consider very carefully if it is worth sacrificing what you were saving for to buy what you want now. For example, if your friend calls and wants to go to the movies and you have $5 in your spending money, but you need $15 for the ticket and snacks. You have been saving to buy a new video game. You need to decide if taking $10 out of your savings is worth going to the movie now. Going to the movie will mean you have to wait longer for what you are saving for.
Spend Action List:
- What do you really, really want most? Put them in order: money to spend on vacation, to buy snacks when you are out and about, to go to the movies, a new toy?
- Use a wallet or purse to keep your spending money in to make it easy to carry with you.
- When you leave the house, take the spending money you need for your outing, don’t borrow because you forgot!
Your ‘Save’ money is to buy things that can cost more than you may have in Spending Money. Maybe it’s a new bike, or gift for someone, etc. It may even take you a year to save up to buy what you want, so be patient! Saving money is hard sometimes because you have to be disciplined and tell yourself “NO” when you want to spend your “Save” money on things you did not plan on buying. This is where mom or dad can help keep you on track.
For your Save Money it is a good idea to open a savings account at your local bank to make it a little harder for you to get to your money if you are tempted to spend it, and sometimes your bank will pay you interest when you have an account with them.
Save Action List:
- Set a savings goal
- Start Saving
- Once you have enough saved in your piggy bank, open a savings account at your local bank
- Once a month deposit your savings from your piggy bank in the your Saving account
- Watch your savings grow
- Reach your goal
- Make a withdrawal
- Buy what you were saving for
- Do it all over again
Need some help learning about this? Try this game from Practical Money Skills! http://www.practicalmoneyskills.com/games/
Giving can be fun, but giving takes practice. Giving may be one of the hardest things you do with your money at first, because it takes money away from something you wanted to buy for you and redirects it to someone else’s need. But, needs are important, and sometimes people need real help.
Giving helps us think about other people and not always about ourselves. There are a lot of great organizations that you can give to and that is where the fun starts! There are a lot of different charities that do a lot of cool work in our community. Some work these organizations and charities may do includes: feeding the hungry, teaching kids to read and giving them books; building playgrounds; finding cures for different illnesses; even training service dogs.
Give Action List:
- List 5 organizations you would like to give to
- Set your “Give” money aside every time you get money
- Discuss the need of the different charities you selected
- “Give” the money to your selected charity(s) on a regular basis
- Volunteer with the charities you give to, when everyone helps, the job gets easier!
Think of Investing as spending money to buy something so that you can make more money (and that’s a WIN!).
For example you may spend $20 on lemons to make lemonade. You can make 40 cups of lemonade that you sell for $1 each. You spend $20 to make $40. Not bad! But what happens if you don’t sell all the cups? You can lose money, too. Investments are things that we have to be really careful about.
Investing is much like saving because it is for the future. But, by investing money you can earn a lot more than you can than in a Savings account, and sometimes faster. When you invest you are buying “stock” in a company. Stock is a fancy word that describes “ownership” in a company. For example, if your favorite vacation spot is Disney World, you can invest in Disney World by buying Disney World stock. If Disney World makes money as a company, you make money as well. But if Disney World loses money, you can lose money.
You can also invest in your own company. Have you ever had a lemonade stand or know someone who has? You buy (invest in) lemons, sugar, and water and you sell a glass of lemonade for more money that you spent buying the lemons.
The reason to invest is for much larger purchases many years away. It can be for college, or for a car when you start driving. The more years you have, the more your money can grow.
Note to Parents: Sometimes to get started investing, it takes a onetime lump sum of money to open an account. If that is the direction you want and your child to go in, consider helping them with the initial investment.
Invest Action List:
- Decide what you want to invest in.
- Open an investment account. Your mom and dad will need to help out here.
- Add to your investment regularly.
The Mint has information online under the “Fun For Kids” at their website: http://www.themint.org/kids/what-is-the-stock-market.html.