5 Tips for Talking Money with Kids
For many adults, money management can be daunting, frustrating and stressful. What can be even more daunting is teaching these skills in a positive way to your children. I’m here to say that it doesn’t need to be stressful, and can actually be fun!
There are many methods to communicating the importance of money management to children of any ages. Here are five ways I use with my child and in my store, Beanstalk:
1. No-strings-attached allowance: I have found that starting an allowance at the age of four is the best time: either a dollar amount for the age they are (a four year old receives four dollars a week), or a specific dollar amount for an age bracket. Keep in mind an allowance is more about practicing with money, rather than being tied to chores or used as a bargain on behavior. The goal is to create healthy feelings about money and not mixed messages or unnecessary stress!
2. Learning to budget, save and give: Start this task with craft time. Work with your child to decorate four boxes with glitter, beads, papers, sparkles – anything your child wants! Then create a label for each box: Savings, Spending, Gifts and Charity. These labeled boxes will be your child’s budgeting tools. Savings and Spending get an equal division of the allowance, while Gifts and Charity get a smaller, equal portion. Savings can either be done at home or in a savings account. My son likes to watch his savings grow at home, practice counting it and then make a special outing to the bank to make a deposit.
It is important to talk about the importance of Gifts and Charity. Setting aside money to help others helps children understand the concept of give and take. It is a wonderful gift to teach your child to see beyond their needs to help others with less. It’s always about the intention and never the amount.
3. Knowing what to say: Setting your children up for a healthy blueprint on money management supports future positive money practices. While it is a good idea to share your experiences, it is important to keep it simple and age-appropriate so they’re able to understand effectively. A five year old can learn about saving and spending, but an eight to ten year old can easily understand the concept of interest earned. A teenager might even be ready to learn about interest charged to a credit card.
4. Understanding buyer’s remorse: How often has your child saved his or her money for a special toy, only to instantly wish they had saved that money for something else? This is relatable because we’ve all experienced buyer’s remorse. This is an important lesson to learn at a young age when saving and spending on smaller purchases, such as Legos or art sets, rather than as an adult with a purchase that is thousands of dollars. It’s hard, but this is good practice. Give them space to think about their wants and to make those mistakes we all have to make.
5. Let them practice spending their money: Remember, it is their money to practice buying and saving with. If your child buys something cheaply made that breaks, listen and support them. It is upsetting, but it has happened to all of us. Use this opportunity to listen to their feelings and empathize by sharing a time this happened to you, because it is important for your child to see that their parent is also capable of making a mistake. Then, encourage them to try again.
I even look forward to opportunities for children to practice money management in my store. My son has his own account at Beanstalk, where he can donate his toys and books for store credit. This has helped remove my responsibility of saying ‘yes’ or ‘no’ if he wants to buy something in the store, because it’s his responsibility to see if he has money in his account. If he decides he doesn’t want to spend his account dollars in the store, he can take the check to divide into his four boxes discussed above. This model has now spread to many of the families at Beanstalk, as children enjoy having their own accounts to resell their books, toys and clothes, and then shop for resale or new!