Disclosure: This blog post was written for The Momiverse, pursuant to their engagement by brightpeak financial. All views expressed are entirely my own, and were not influenced or directed by either the Momiverse or brightpeak financial.
What is financial literacy?
No, it is not reading about ways to spend money!
Financial literacy: “The ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it (turn it into more) and how that person donates it to help others.” ~ Wikipedia.org
“Money grows on the tree of persistence” ~ Japanese Proverb
At a certain age, kids just about do think that money grows on trees! As little kiddos, they prefer twenty pennies over a dollar, so at that phase they just need to learn how to hold onto what they get, then later on they’ll need to learn to do the math! As they mature, they benefit greatly from engaging in exercises that have them not only learn the value of the dollar, but practice skills of managing their own savings account and budgeting their spending.
How do parents kick start this process of instilling financial literacy?
More than anything, I believe what resonates with children most is what their parents do routinely! We might not even realize that we are teaching by example when we let our kids witness us resisting the temptation to buy that new shiny object glaring at us from the display case, making regular bank deposits, or using our comparison shopping apps.
It is important to include kids in conversations surrounding how we make and save money and have our kids participate in the process of looking up/comparing prices, preparing food from scratch, cutting coupons, etc.). I think we will be doing kids a real service if we join them in certain discussions about our purchasing decisions and share the reasoning behind our decision-making.
The following are five ways we can have involvement with them in the process:
If every time our kids saw something they wanted were to come to us to fork out cash, they would get used to depending on an external force (you mean I am not my kids’ “walking bank account?”) vs. becoming self-reliant consumers. Similar to how I view the value of giving kids an allowance, I am also an advocate for encouraging young ones to tap into their own earning power, so that under their parents’ care, they learn to manage their own accounts, budget for something important, and work for what they want.
There is an good reason why delaying gratification is important, as it teaches that good things are worth waiting for, and this hopefully influences their character development and relationships – ideally fostering a strong respect for the earned dollar!
This is opposite of impulse buying, right? We might not realize how powerful it is for kids to witness little things like their parents turning down an expensive model for an economical one, for example, or refraining from grabbing something and throwing it in the shopping cart. Kids need to see us going through that process and hear that two-letter word, sometimes, so that in the future they are well-armed with the skills to demonstrate restraint, themselves!
A dollar saved really is a dollar earned – especially when the kids experience it for themselves! One of the examples etched into my memory bank is when my girl had $40 to spend that she had received as a gift. Having been so accustomed to only spending gift cards at a particular higher-end store, she naturally returned there, only to see things through a different lens, this time! The shirt she wished to purchase ($29) compared to a more economical store’s selections (where she could get three for that price) made her eyes bug out of her head!
“What a rip-off, Mom!” she exclaimed. I will never forget that snarl she made, and how unless she had a gift card to that store, she would walk right past it from then on!
3. Teach Savvy Consumerism
Then there is also sharing with kids that sometimes paying more is worth it! When it comes to our health and well-being, kids grow to understand that we are investing in our future. What choices (I ask them) are you making now that might cost a little more money, but in the long run, will pay off? Investing in quality (vs. quantity or the cheaper route) often pays off in the long-run!
My son shared that his dollar store toys would fall apart a day or two after buying them. Perfect example! My girl really “gets” that buying healthful and/or organic food might cost more, but in the long-run are choices that pay off. I almost wanted to pay them for giving such perfect replies, but I refrained!
Especially during the holidays and their birthdays, my kids make a list of “wants” vs. “needs” and I think it helps them grow a greater appreciation for the privileges that they have. Typically, we as parents, provide what they “need,” but it is important to remind them that the two classifications are quite different. How much they are willing to work or wait for it is often proportional to how much they truly desire things or opportunities! In time this will translate to the kids investing time and money in a higher education.
4. Giving Back
If kids grow up with a sense that they are only to spend money on themselves, they will be missing out. Charity begins at home, but does not need to break the bank! Kids can find some way to earn money and donate the proceeds to a cause. Funds raised could be to help out with PTA donations (kids love having lemonade/cookie stands) or to donate to the needy. Donations could be in the form of money or time. It builds character, too!
I am a big believer that we do not encourage kids to be entrepreneurs as much as we could. Sure, kids should have (some) work expected of them, but also many opportunities to earn extra cash so they can feel the satisfaction of saving up for a bigger ticket item, like a $50 LEGO set or a higher end Halloween costume (or pay part of it if it is pricey!). Just because kids might grow up more privileged than others, it does not necessarily mean that they will be spoiled, so long as they demonstrate considerable responsibility in what is expected of them, and take good care of their goodies.
My girl got creative this summer and walked our close neighbors’ dogs for 15 minutes for extra cash. She split the mullah with her friend and at the end of the whole hour, she had me questioning if I am in the right field! One summer (then 5 yo) my son realized he had such a talent for massaging people’s arms (OK, he was so good that I felt compelled to pay him!!) that he started offering every lady who entered the hair salon I frequented a complimentary arm rub (with high hopes for tips)! Feel free to write in with disapproving emails-lol!
— Stacey Ross (@sdbargainmama) October 16, 2013
Disclosure: Again, all views expressed are entirely my own. I was compensated for this post.