Money Savvy Generation: Raising Money Savvy Children


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Raising children that are money savvy is an important parenting task in child development.  Laying the groundwork about money principles when they are young is so important because it helps your children understand the role money plays in daily living. Clearly the future of money is changing, we will still use cash for a few more decades.

By raising and teaching your kids at a young age, it helps them decipher money principles and build financial confidence in their decision making as they get older.  Your children will also know how to save money as a high school student if they are taught about the principles of money early in life.

Being able to make financial decisions is an invaluable life lesson. Knowing how to become money savvy in life is important.

Below are some great ways on how to raise kids who are money savvy based on their age groups.

How to Start Raising Money Savvy Kids

Money Savvy Kids: Age 4-9 Preschool, Kindergarten, and Early Elementary

1.  Money 101 – Start with Communication and Knowledge About Money

This is probably one of the largest areas to cover because it’s broad.  It is also the most important area for raising children because it is laying the foundation of understanding money lessons which will go a long way in shaping your child’s management and principles of money as they get older.

As a parent raising children, one of the most important thing you can do is to have discussions on and about money.

The goal is to have your child understand the use of money such as:

  • Why we have money?
  • What is money used for?
  • How do we get money?
  • When do we get money?
  • Where do we get money from?

Just like learning the “who-what-when-where-why-how” in school, as a parent raising children, that is what you should convey to your kids.  This elementary lesson of money can be taught to them in this simple format.

money saving pig

Why do we have money and what is it for?

Money when you think about it came as a standard medium from the result of barter and trading.  In order to live and get necessities, people would barter and trade items.

At this age, kids are learning these very things about the world and early civilizations in social studies.

Therefore this makes it a perfect time to discuss money and why we have it because it relates to these early civilization school lessons.  We use the money as a “universal” way now to “barter” or in today’s terms “pay” for a necessity we need to live just like our ancestors past.

You should cover topics such as how many dimes make a dollar and how many quarters are in a roll so they understand monetary values of coins.

How and where do we get money?

Mom and Dad have to work.  While you are at school painting me a Picasso with your two fingers, I go to this place called work where I have a certain task I do all day.   I do this task for either another person or a business for money.

NTP (Note to Parent): you will get side questions like what is a business?  My advice is keep it simple.  Do not try to explain things like how the auto industry works but rather simplicity.  McDonald’s is a business.  A lot of people go there to work and there are a lot of different types of jobs.  They sell chicken nuggets, like the ones I buy that you love and devour in 22 seconds.  I use my money I make at my job to pay this business for your chicken nuggets.

When do we get money? 

Every so often, I get money from my work.  Usually it is every two weeks.  They give me this piece of paper with a number on it and I take it to that place called a bank, you know where that nice lady gives you the suckers and I get a bunch of money; not like monopoly money, real money. I also have explained how direct deposit times work and other relevant topics such as instant online check cashing to them.

If your kids are like mine, your conversations will be similar to the above.

Below are some Parenting Reinforcement Tips to demonstrate examples of the topics above and will help your children actually observe how you use money in your daily living:

  • Parenting Reinforcement Tip Saving:

You can explain to your children that opening a savings account is important because we sometimes have left over money that we may not need right at this moment.  We put this money in a savings account and keep it there until we need it. Don’t forget to use your money savings pig!

  • Parenting Reinforcement Tip Shopping:

When raising children, taking your child shopping is probably the best way to demonstrate to them about the use of money and necessities for daily living.  You will also want to tell your child the lesson between wants vs. needs. Often times, when I am shopping my one son now will remind me of this lesson!  So be warned, if taught correctly it will come back to you as a lesson!  History repeats.

You can also turn everyday shopping into a parental teaching moment by pointing out sale prices and explaining how the price is cheaper than the normal price.

  • Parenting Reinforcement Tip – Board Games:

One of the best ways to demonstrate money principles is to turn family game night into an educational fun night.  I cringe at playing Monopoly with my oldest because it usually turns into me losing quite a bit of moolah to him and it lasts for several hours.  However, board games that demonstrate the use of money are great because they teach money lessons, and also offer an opportunity for kids to demonstrate their math skills as well.

Teach Money Savvy Curriculum

There are a lot of resources out there that can help parents teach their kids to be money savvy and about personal finance. Although most school districts to not teach personal finance to kids, they do offer some resources for parents to use.

Money Savvy Kids: Age 9-12 Older Elementary Kids

2. Money 201 Goal Setting, Earning, Saving, Spending Choices

Raising children at this stage, kids are now beginning to think about their roles with money; specifically how they can save, earn, and spend it it.

Goal Setting

money savvy generation

Having a goal is essential for kids so they have something to work, earn, and save for.

My financial goal setting began at the age of 9 with a 3 foot tall plastic Coca Cola bottle bank.  I was dead-set on filling that thing up with as much coin moolah as I could.  Having a bank like that was a great tool that reinforced what I knew at the time about saving.

You can also use things like the traditional money saving pig or better yet, a money savvy pig to collect coins in.

This is also a good time to teach more advanced lessons such as how to build wealth 

To become an adult well educated in financial management begins with financial goal setting as a child.

Earning money

Raising children and talking about earning money is a great role for kids at this stage.  By having REAL money (not Monopoly) they will be able to choose and decide what to do with it.  Ways for younger kids to earn money might be through an allowance and doing tasks around the house.

There are a lot of creative ways to make money for young kids as well.

My kids are expected to do certain household chores which they receive no money for.  Above and over those, I have separate lists I give them with specific tasks and duties.  I pay my kids a flat weekly fee IF they complete ALL tasks on my list I give them.

I recommend a flat fee approach because one of my kids decided to cherry pick and negotiate with my how much for only doing certain tasks one time.  So, now I have a flat fee all-or-nothing policy.  This seems to have worked well so far.   NTP: You should disclose this up front to your kids so you are not called out like I was!

Besides allowance, there may be other tasks such as helping your neighbors and dog sitting (if they are old enough) to earn money from.  Doing other odds and end jobs for neighbors, especially older ones who may not be up to doing their daily tasks of taking care of certain items around their house is also a great way to earn some extra cash above allowance.

Spending Choices

I spend a lot of time talking about this lesson with my kids as it pertains to Pokemon cards!  Discuss spending choices with your child. 

Often times I will put the question back on my child which forces them to make a decision.  “Do you really want to spend ALL of your money on Pokemon cards?” 

Or

“if you spend all of your money on this item, then you will have no more money left right now to buy other things you might want or need next week.  You are free to spend this money as you want, because it is your money but you have to live with the consequence then if you run out of money.”

Bank of Dad will not be giving out interest free loans.

Saving

When kids start to earn money, they are going to want to spend it.   As a parent raising children, talk about the importance of saving a portion of the money they earned to put towards their goal.  By initiating this thinking, they will be used to budgeting when they get older.

  • Parenting Reinforcement TipSaving:

You can help your child save some of their money by encouraging them to set aside a certain portion.  I do this with all major events such as birthdays or things like communions where we keep some out for them to spend but we put 50% into their savings account to go towards their goal.

Money Savvy Kids: Age 13+ Teenage and College Kids

3.  AP Money – Budgeting, Tracking, Student Loans, Checking, Credit

Just like adults have to budget and track their expenses, it is a great idea for your kids to do this.

Budgeting

Maybe you have decided that your kids will be responsible for their own cell phone charges. Explaining how to budget money is essential to them.

parenting kids

Having them write out a budget for these types of expenses is such a great thing to do.  This is great to do because they are starting out early with managing their actual money from allowance or PT jobs and applying it to current and future obligations like their cell phone.

They are writing down what the amounts are that they will owe each month so they will know how much money they will need.

Also during this age, they will develop a social life and probably go on dates.  Raising children and discussing etiquette and who pays and how to plan for that is also important.  This will also bring you closer to your child as well to come talk to you about other issues maybe not related to finance so it is a win-win all around.

Have your children observe you and talk about your household budget strategy with them.

Tracking

Having your child physically track their bills they paid with their income every 30 days is a great exercise. Use tools such as a personal finance flowchart to help reinforce tracking and decision making with regard to budgeting.

  • Parenting Reinforcement Tip – Tracking

Do this exercise with them, and maybe even alongside of them with your own finances.  This will give them a future glimpse of what “adulating” finance is really like.  By doing this exercise with them periodically, it gives an opportunity for communication between you and them.

You may be able to help them if they are struggling from their goals and they will realize things like houses and whatnot cost a lot more.  Obviously, this dynamic is different for every family and I only recommend discussing those issues of they are of the appropriate age to understand.

Student Loans, Credit

You will be having discussions about college as your kids get older and how to pay for it.  Explaining in detail how student loans work and the cost of them will go a long way.  Also include things like how to use a credit card, and why establishing credit is also important when you become an adult.

Credit will affect everything from when you buy your first house to your first car.  That is why it is so important that you make good financial decisions.

Checking

I didn’t know what a checking account was until I was in college. Teaching your kids how checking accounts work and even what are starter checks will put them ahead of their class.

These exercises will eventually help them understand bigger topics such as how to save for a house down payment which will be important at some point in their life.

Parenting the Money Savvy Generation

As a parent, raising children who are money savvy is a responsibility we should all take seriously.  Parenting the money savvy generation extends past elementary children and also includes how to teach teens about financial responsibility topics. Talking with your kids about money on elementary levels such as what money is to more advanced levels like how to buy a house, are invaluable lessons your kids will carry with them their whole lives.

Raising children and seeing them become successful in life professionally, personally, and financially, is a great reward.  As a parent, there is no better reward.

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BG Vance

For over 20 years, BG Vance has been a leader in public and personal financial management. He's developed and managed public budgets in excess of hundreds of millions of dollars. He is passionate about the FIRE movement and was featured in the Detroit News in 2001 about saving for retirement. Through the years, he's assisted families and individuals with getting their finances on track. He holds an MPA, is a licensed Realtor, and is currently working on a book about personal finance.

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