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7 Facts Of Teaching Kids About Money
Posted October 16th, 2008 by master
in
Recently I read a good article entitled “Teaching Kids About Money – Do You Know These 7 Key Facts?” The 7 facts are listed in this order:
1. The first premise is that “Financial Wealth is created when your money makes money (rather than you making money).” This is a pretty eye opening concept to most people, as they are never taught ways for their money to make money. Rather, most parents are just hoping they can teach their kids how to work in the first place. A good starting point, but definitely not the end all!
2. The second suggestion is to make sure they know a simple definition - ROI means Return On Investment. Believe it or not, most kids do not understand this simple concept. I worked as a business consultant for want to be entrepreneurs for many years and it never ceased to amaze me the number of people who did not understand simple concepts like supply vs. demand, and return on investment.
3. The false belief that you will get out of debt and become wealthy as you “work harder, get a raise, make more money, have greater commissions… are just lies that 20th and 21st Century American society has created.”
There is a responsibility in teaching kids that now is the time to save and invest. Far too many kids - (attention college students racking up tens of thousands of dollars in student debts) – have a spend now, worry about catching up later attitude.
4. Giving is part of gaining. I have attended a number of different wealth creation seminars and one message I am always somewhat surprised to hear is that you must give to gain. Many wealth creators promote giving money to charities, educational institutes, etc. as a way to spread the wealth. Parents who teach children to be wisely benevolent with their money are truly giving a gift that keeps on giving.
5. Good children's banks have 4 parts - Investing, Donating, Spending, Long-term Savings.
I have to admit that I never had one of these!
6. Allowance only works if you have a complete plan to teach wealth habits to your children.
The lesson to be learned here is that the responsible parent will help his/her child plan what should be done with the money earned, and what the short and long term consequences of any spending will be.
7. I loved this last point, because it is painfully true. Children actually ignore you when you start talking to them about money (a.k.a. trying to teach them). Children learn by doing.
Rather than sitting your child down to “explain everything” (in that dreadfully annoying preacher’s voice, which would cause you to cringe if you were to actually take a second to listen to yourself), you might consider playing a creative money management game. Alternatively, you consider purchasing your child his/her own copy of a household budgeting software. One budgeting concept that works well for children is the envelope budget system. Children find this concept easy to follow because it is extremely visual. The concept behind envelope budgeting works like this: a budget can be represented by a number of envelopes, which represent spending areas (i.e. savings, entertainment, school supplies, clothing, etc.) Each envelope is assigned a monthly budget (i.e. $10.00 per month). As the budgeter spends money that expenditure is withdrawn from the appropriate envelope. This simple concept can work wonders for parents looking to teach children about money management. Good luck!
1. The first premise is that “Financial Wealth is created when your money makes money (rather than you making money).” This is a pretty eye opening concept to most people, as they are never taught ways for their money to make money. Rather, most parents are just hoping they can teach their kids how to work in the first place. A good starting point, but definitely not the end all!
2. The second suggestion is to make sure they know a simple definition - ROI means Return On Investment. Believe it or not, most kids do not understand this simple concept. I worked as a business consultant for want to be entrepreneurs for many years and it never ceased to amaze me the number of people who did not understand simple concepts like supply vs. demand, and return on investment.
3. The false belief that you will get out of debt and become wealthy as you “work harder, get a raise, make more money, have greater commissions… are just lies that 20th and 21st Century American society has created.”
There is a responsibility in teaching kids that now is the time to save and invest. Far too many kids - (attention college students racking up tens of thousands of dollars in student debts) – have a spend now, worry about catching up later attitude.
4. Giving is part of gaining. I have attended a number of different wealth creation seminars and one message I am always somewhat surprised to hear is that you must give to gain. Many wealth creators promote giving money to charities, educational institutes, etc. as a way to spread the wealth. Parents who teach children to be wisely benevolent with their money are truly giving a gift that keeps on giving.
5. Good children's banks have 4 parts - Investing, Donating, Spending, Long-term Savings.
I have to admit that I never had one of these!
6. Allowance only works if you have a complete plan to teach wealth habits to your children.
The lesson to be learned here is that the responsible parent will help his/her child plan what should be done with the money earned, and what the short and long term consequences of any spending will be.
7. I loved this last point, because it is painfully true. Children actually ignore you when you start talking to them about money (a.k.a. trying to teach them). Children learn by doing.
Rather than sitting your child down to “explain everything” (in that dreadfully annoying preacher’s voice, which would cause you to cringe if you were to actually take a second to listen to yourself), you might consider playing a creative money management game. Alternatively, you consider purchasing your child his/her own copy of a household budgeting software. One budgeting concept that works well for children is the envelope budget system. Children find this concept easy to follow because it is extremely visual. The concept behind envelope budgeting works like this: a budget can be represented by a number of envelopes, which represent spending areas (i.e. savings, entertainment, school supplies, clothing, etc.) Each envelope is assigned a monthly budget (i.e. $10.00 per month). As the budgeter spends money that expenditure is withdrawn from the appropriate envelope. This simple concept can work wonders for parents looking to teach children about money management. Good luck!