My older daughter, Sophie, and I have a pretty good routine going at the mall. She understands that most stores are like museums: She can "ooh" and "ahh" at stuff, but she usually can't take it home.
On one particular day recently, though, Sophie's willpower was at a low point. She really wanted a stuffed animal, a favorite character from a movie. After several minutes of listening to her pleas, I finally said I didn't have the money. "Okay, Mom," she said thoughtfully. "Then could you just pay for it with that silver card in your wallet?"
Now, I'm pretty good at managing our family's money; in fact, using Quicken financial software is almost a hobby for me. But during that moment, I realized I'd missed a step in Sophie's money education. All the counting-penny games and toy cash registers in the world are no match for what we parents do with and say about money in the real world. That's how kids learn, of course: By watching us, day in and day out. It's so easy, in our busy lives, to overlook some of the crucial -- yet simple -- ways to teach kids about money. Five that you can start now:
Don't say "We can't afford it"
You can start teaching a child as young as 3 a healthy attitude about money simply by using the right language, says Neale Godfrey, a mom of two and author of Money Doesn't Grow on Trees. "Saying 'we can't afford it' to your child may be a lie, for one thing -- you might actually have the money but have chosen not to use it," she says. "We don't want kids to feel like they're victims of money." You want to show your child that you're in control of your cash, not the other way around.
Children won't learn to manage their money well unless they understand they have a choice about how to use it. When your child asks for something you don't want to buy, say "I haven't budgeted for that this month" or "I don't choose to use our family's money for that."
The next step is to start teaching your child about spending, saving, and making good money choices. To do that, give your child a little spending money of his own, starting when he's as young as age 3. (That's when he'll begin to grasp what money's for.) Surprisingly, 83 percent of parents don't give their kids allowances, according to a recent survey on Parenting's MomConnection, an online panel of more than 1,100 mothers around the country. But even 50 cents a week per year of your child's age ($2 a week for a 4-year-old, for instance) can be a great teaching tool.
Then help your child develop a simple plan for his allowance. A good rule of thumb:
- 60 percent of his money goes into a savings jar
- 30 percent goes into a "quick cash" (spend freely) jar
- 10 percent goes into a "giving to charity" jar
Don't worry if your child doesn't seem to get the saving and spending concepts when you first start. "Think of it like teaching your child to brush his teeth: Kids don't always understand why they have to do it, but you're helping them develop a good habit that will matter later in life," says Godfrey.
Teri Cettina also writes for Bankrate.com and Family Circle.
Show them the money
Between the bills and the plastic you take in and out of your wallet, it's no surprise that your child can get confused about what's what, and even think that credit cards have magical, unlimited buying power. In fact, most kids under 7 just won't get the connection between a card and the money behind it.
That's why it's a good idea to use cash for some of the routine purchases you make when your child's along, whether it's fast-food treats or play-park admissions, and count out the dollars for her to see.
You don't have to give up the convenience of your credit cards, though. Kids also need to learn how to use plastic wisely. "Once they're out of high school, kids will be using credit and debit cards, too," says Shannon Plate, a family budget counselor and author of Degunking Your Personal Finances. So start talking about them now.
When you use a debit or credit card, let your child see you record your purchases, just as if they were checks. Show her how you subtract money from your balance every time you buy something. This is especially good to do with 7- to 9-year-olds, who are heavily into adding and subtracting. Do the same thing when you withdraw money from an ATM, even with kids as young as 3. "Say 'I just took $60 out of my bank account -- and this is what it's for.' Show them there's a plan for the money. You're not taking it out just for the sake of having it," says Plate.
Talk about how much things cost
Whether it's a toy or a T-shirt, kids should have a ballpark idea of the price of things in their lives, says Craig Israelsen, Ph.D., a professor of family finance at Brigham Young University, in Provo, Utah. After all, prices help kids understand why we can immediately buy two 99-cent cans of soup but we have to save for a $99 talking toy.
Borrow your child's toy cash register to talk about what you spend. Israelsen and his wife used play money to show each of their seven children, starting at around age 6, how much was in Dad's paycheck. Then they showed them how much they took out for groceries, clothing, and other essentials. "By about 12, our kids realize, 'Mmm, most of it's already gone,'" says Israelsen.
For a younger child, you can keep it simpler (and your salary more private) by subtracting the costs of a day's errands (milk, gas, stamps) from a "Today's Expenses" fund of, say, $40.
In most American households, parents don't talk enough about finances with their kids. A whopping 76 percent of the Parenting MomConnection survey respondents say their kids have never asked how much they earn -- a sure sign that money isn't a frequent conversation topic. Family-finance chats are a good thing, says Israelsen. Just be careful not to talk about your child's costing money, as in "Paying for your school clothes made us go over our budget."
Buy something that isn't on your list
Do you ever tell your child that you're absolutely, positively not going to buy anything for her at the mall, but then cave when she falls for the adorable dress-up princess shoes? Or maybe you've broken down and bought some to-die-for boots for yourself, since they happened to be on sale. Good news: Impulse purchases like these do not count as F's on your parenting report card.
Virtually no one walks into a store with a perfectly preplanned shopping list. There might be a totally legitimate reason to buy something you didn't plan for ahead of time. "The important thing is to explain that briefly to your child," says Marsha Goetting, Ph.D., a family-economics specialist at the Montana State University Extension Service, in Bozeman. Once you've started giving your child an allowance and she understands that some money is set aside to spend freely, explain that this is how you choose to use yours.
And besides, it's good for your child to see you be flexible and enjoy what you've earned. That's because being smart about money doesn't just mean knowing how to budget and save -- it also means being able to spend wisely.
Be open with your spouse
More than a third of moms in the Parenting survey admit they've hidden purchases from their partners. Why? Some moms (37 percent) say their husbands think they spend too much.
If you're not telling your partner that you bought yourself a new pair of jeans or you fudge how much you spent on your daughter's haircut, she will pick up on the secrecy. It isn't good for kids to see that kind of distrust between parents -- or to learn that money is something you have to be secretive about in your own family. So stop ferreting away cash!
Then look a little deeper. Why do you spend and not tell? Unless you're a compulsive shopper (which most of us probably aren't), you may simply need to tweak your money habits. Start by talking to your partner about how each of you will spend personal money, says Amelia Warren Tyagi, coauthor of All Your Worth. "Every marriage needs a little bit of free money -- a little money for her, a little money for him -- that can be spent with no questions asked," says Tyagi. "Even if you decide it's only $20 a week, that's fine." This can go a long way toward eliminating secret expenditures.
If you're not up front about the cost of things you've bought for your kids, talk to your husband about the true price of their clothes and activities. Since moms tend to make these purchases, men often don't know how expensive they can be. A frank discussion, receipts in hand, might help end your disagreements -- and your habit of hiding purchases. Not only will that be better for your relationship, but it'll help foster the right kind of attitude about money in your child.