Tightwaddery: Teaching Children About Money

by Kelly Jo Landers

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11 Ways to Teach Kids about Money

Modeling Money Behaviors

Do you want to give your children an edge in life? If you do then you must teach them about money.

I'm not talking about promoting the pursuit of money. I am talking about the general handling of money. How to earn it, save it, spend it and how not to waste what you have.

Children are a growing segment of consumers. Marketers know this and subject them to "buy" messages at every opportunity. If you don't give them the skills to handle the messages they receive and make educated, reasoned decisions you will cripple them.

The short lectures won't work with children, especially if you actually mismanage your own finances. They are incredibly observant of what you actually do. Do as I say and not as I do will not work when you are teaching them to handle money.

Start by analyzing your own situation. Then let your children sit in on financial discussions. Let them see you paying your bills. Let them understand that you only have so many dollars at the beginning of the month to pay for everything. Let them track your progress as you save for a purchase, such as a vacation.

As an aside, you may need to be very general with young children. You must explain, of course, that your financial information is confidential. A special secret not to be shared with anyone. But this may be difficult for young children, so they do not need to know specifics that they may accidentally share with the entire second grade.

Point out mistakes you may have made, such as using the credit cards. Explain that the ATM is not a fabulous money machine that prints money as you need it. Give them examples of the consequences for poor decision making.

If you don't already give your children an allowance, I ask that you consider doing so. Only when they have their own money to manage can they put the lessons you've given them into practice.

We use a three - tiered system in our house. The first consists of chores that must be done simply because my son lives here as part of the family. These include putting away his own laundry, taking care of his dog, cleaning his room, getting his homework done every day, etc.

The second group are the chores he can earn an allowance from. This list includes vacuuming the carpet twice during the week, running the stick vac on the hard floors once, setting and clearing the table, taking out the garbage, loading and unloading the dishwasher, complete responsibility for the recyclables and taking out the garbage.

The third tier are jobs that he can be "hired" for at $2.00 an hour. They vary, but always include the snow shoveling. Some jobs he's been hired for include sweeping the garage, vacuuming out our vehicles and piling up brush as my husband cut it down.

Buy them a wallet or small change purse to keep their allowance in. Once children have money it will immediately burn a hole in their pocket. The items they want will start to be available to them. Each time you pay them they will want to go and buy.

Don't despair, this is where you can start to teach them. Take them to your bank to set up a savings account. Have the person at the bank explain about earning interest. For some reason, that person behind the desk will have a more profound effect on your child than you will at the kitchen table. They will tell them that making regular deposits is the way to see their money grow.

Now sit down and talk to your children about the "things" they want. Have them tell you what they want. Discuss priorities and have them rank what they want as most important or secondary. Write down this list. Keep a copy and put the other in their wallet or change purse.

Remind them they will have to save first, before they spend. You may need to set an amount that must be deposited each time they are paid. Be firm and tell them they must. Have them do the recording with each deposit. Point out the interest they earn. Praise them as the amount grows.

When something appeals to them in the store and they ask you to buy it you should have a standard response. First ask if they have their wallet or purse. Then ask if the item is on their list or if the item replaced something on the list. Then let your child choose whether to buy it.

This will usually result in a purchase even if it is a piece of junk. But this is a lesson your child must learn. They want the item in front of them so much and don't understand the concept of delayed gratification. Only when the thrill wears off, the item breaks or they realize that the things they listed before are really more important to them will they begin to understand. Experience is a wonderful teacher.

Even better is the first time your child aims for a large purchase. Say they are aiming for a new bike that costs $100.00. Between the day they decide they want the bike and the day they actually buy it will be lots of work. More of their allowance will be saved. The junk toys in the store will no longer have the same appeal.

The day they buy the bike will be a day of triumph. It will make a permanent impact on your child that he wanted something and saved for it. He will understand concretely that to get what you want in life you have to make smart choices. If they do it once they will know they can do it again.

Reinforce this by talking about the advertising they see. Evaluate the quality of those things you buy out loud. Let them see and hear you weighing the choices you have to make.

You will have given your children the tools to their future. They will avoid many of the problems that you have dealt with. Your children will grow up to handle their money wisely. Setting priorities and working to achieve a financial goal will enable them to do likewise in the other areas of their life.

The theme of tightwaddery.com is that Tightwaddery equals Freedom and Freedom equals Joy. Presented by Kelly Jo Landers, the author of Tightwaddery, the site provides guidelines for a tightwad lifestyle and an opportunity to live a simple, more abundant lifestyle.

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