Money doesn't grow on trees

Money doesn’t grow on trees. You’ve probably told your kids that, but have you taught them how to save money? Easy ways to save.

“Money doesn’t grow on trees” is heard in households all the time when kids beg for toys or treats they don’t need. Children don’t understand the concept of money. It’s our responsibility as adults to teach them the difference between “wants” and “needs”. Saving should begin as a child.

Teaching kids about money

Money moves our world, but it’s often a neglected topic in households and even in schooling. Most schools don’t teach students how to balance a checking account or what to look for when getting a mortgage.

For several years, I worked with students who applied for a Money Smart Scholarship through Community America Credit Union. It’s a great program that focuses on the value of money. Through interviews with the students, some of the middle school students had no idea how money works. They didn’t understand the basic concepts like good and bad credit. While young, they are not too young to begin learning those principles.

Through interviews with the children, you could tell which parents placed priority on money and which did not.

Here are 5 ways to teach your kids about money.

Start small

economy photo
It’s never too early to start talking to your child about saving and spending. Start with a cute piggy bank, and let them experience how long it takes to earn a dollar from loose change. Let them see how long it takes to save for that ice cream from the ice cream man. Keep it simple at the beginning, but get your child into the habit of saving early.

An allowance is a controversial topic. Some parents don’t feel children should receive one. I think it’s a great starting point to teach the principle of money. Even an allowance of a $1 a week will teach the child the value of money. Instead of saving up for a $300 bike, they might save up for a sweet treat from the ice cream man. It doesn’t matter the size of the goal. The knowledge the child will learn saving money and waiting for the item they really want is a valuable lesson.

Be realistic

Children need to learn the value of money at a young age. Have family discussions about money, and how you have to work to get money to spend. Talk about common expenses in your household. Be honest and real. Don’t sugar coat the reality of your budget. You can be honest without scaring your children into thinking their won’t be food on the table.

Many families experienced tough times when the recession hit in 2006 and beyond. Jobs, homes, and investments were lost. If your children were no alive then, or too little to understand what was happening then, share the difficulties families experienced. Setting the tone early will help later in life.

Look for lessons daily

financial life lessons
Let your child earn money in the neighborhood by shoveling driveways, mowing lawns, or selling lemonade. Simple tasks like this teach valuable lessons.

I still remember the girl who told me about her lemonade stand. She worked all day selling money in the heat. By the end of the day, she was hungry. She ordered a pizza with friends. When the pizza arrived, she realized it took an entire day’s worth of work to buy that pizza. A perfect way to teach a child the value of money. A lesson that stood out with this young girl as she recounted it during the Money Smart contest.

Free tools

There are lots of free resources to help you teach your child about money. You can view some online or attend a free class at participating high schools.

Most libraries offer free online classes to teach about a wide variety of topics including money.

Consumer Action also has a 3-series guide to money including mortgage questions, credit, and retirement accounts.

  • Money Management 1-2-3 (earning a paycheck, budgeting and saving, checking & savings account, credit explained, building positive credit, using a credit card.
  • Money Management 1-2-3 (updating a budget, taxes, saving for a purpose, investing, renting versus owning, mortgage, homeownership, insurance)
  • Money Management 1-2-3 (investing for life, retirement income, home equity loan, reverse mortgage, protecting your assets, covering medical expenses, long-term care insurance, and estate planning)

If you have a child in high school, encourage them to enroll in a business education class or similar course (sometimes it’s home ec) where they will learn the basics of money and everyday living. Check to see if Junior Achievement courses are offered in your child’s school. This is a great curriculum where professionals come into the classroom to teach students using personal and professional examples.

Even if your child is not in the JA program, you should check out their Student Center to help them manage their money, find a career, build a business, or plan for college.

Starting with the class of 2014, schools will be required to teach students some financial literacy concepts. There is not a set curriculum, just guidance on the concepts that should be taught. Some schools are teaching more in-depth lessons while others may be skimming the surface. It’s an unfunded mandate so every school is handling it differently.

Credit cards

If you have a college aged child, you’ll find that you play a role in your student getting their hands on a credit card. Anyone under the age of 21 needs a co-signer to get a credit card or the individual needs to show proof of income. College kids often find ways around the laws so just make sure you talk with them about the risks of credit cards so they don’t have someone else sign the form for them and still end up in debt.

The Federal Reserve Bank compiled a database of cardholder agreements between schools and creditors that are made available for college students. Before you sign an agreement for your son or daughter to get a credit card before age 21, read the agreement and look for hidden fees.

Consumer Action has a good guide to give you guidance on WHEN you should give your child a credit card.