One question every parent faces is when and how to teach kids about finance. The reality is bad financial habits are hard to break the older we get. Also it is a proven fact that the older we get the harder it is for us to learn something new. So it is well established that we need to to teach them young.
The Issue with Starting Young to Teach Kids About Finance.
My mom use to have a saying when I was a kid, “You are only a kid once, you should not grow up too fast”. She often said this about me wanting to work full time in the summers in high school. Ultimately I did not listen. Instead I worked 40 hours a week the summers of my Junior and Senior year. As such I did miss out on a lot of time with friends that honestly might have been better spent at that age. After all 7 dollars an hour as a life guard for 10 weeks in the summer didn’t exactly set me on the road to wealth. I learned a lot in that job about the pros and cons of work. I’m just not sure those same lessons could not have waited until college. I believe I got obsessed about finance way to early.
While I use high school as my example, the reality is the risk to starting too early begins much sooner. My oldest son has a Bearnstein Bear book that touches on how to teach kids about finance. The simple premise is the kids start a lemonade stand to make money to buy some items. Ultimately they become obsessed and forget to play and have fun. I want my kids to not worry about money all the time and enjoy playing as kids as well. As such I obviously don’t want my kids to go to the extreme. Given their young, they are unlikely to have the self control to not go to the extreme. As such while we’ve established the need to start them early, the key here is to do it in such a way that money is not the key point. Learning about finance needs to be a side effect.
How to Teach Kids About Finance
I believe the single best way to teach your kids about finance is through games. You could use the old standbys of Monopoly or Life, or many of the newer strategy asset based games. In any case many board games tend to focus on the aspects of both investing and saving for the future as strategy to get ahead. However, the focus is not on how they specifically use and spend their personal money. As such we avoid the risk of them becoming obsessed. I’ve begun these games in lite versions already with my 5 year old. We got him a cash register toy this year for Christmas and I’m starting him on learning the game of life.
The Grasshopper and the Ant
An additional way I remember learning about finances are stories. The money related story and cartoon I remember seeing as a kid is the grasshopper and the ant. It had a very important message about saving and being prepared for the future. For those who have not read the fable or seen the associated Disney Cartoon, the story follows a grasshopper and an ant. The grasshopper fritters away all summer while the ant prepares for winter. Once winter comes the grasshopper is starving and only survives due to the good graces of the ant who lets him into his house and feeds him. This story particularly taught saving for the future and charitable acts.
This story had nothing to do with my drive to work full time in high school, and in fact did not lead to any obsession. It was just another story that I enjoyed. But it taught a life lesson that I obviously still remember. I plan on introducing this story and others like it to my kids over the next few years. I’ve already started with the aforementioned Bearnstein Bears book. With any luck the books and games will help them learn the power of saving and investing wisely while still having fun.
Older Kids Can Handle the More Direct Approach
Needless to say the above plan only goes so far. When my kids are in their teens the risk of obsession will be much reduced and the importance of them understanding their specific circumstances will increase. They will then need to know the impact of choosing a really expensive college, buying their first car, and other truly important individual financial questions. So my current plan has me bringing the conversation more specifically to finances when they reach their teenage years. At that point we will deal with things like allowance, first jobs, etc and have them balance money directly. Hopefully by then I will have enough content on this blog that I might even be able to reference some of it in the discussion. The clock starts now, I have 8 more years of content to kick out ;).
When did you start to teach your kids about money? What methods do you use? Do you have any board games subtly about money you might recommend for a 5-7 year old?