5 Simple Tips to Raising a Money-Smart Kid
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3. 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, Utah. 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,’” Israelsen says.
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. Family-finance chats are a good thing, Israelsen says. 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.”
4. 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. “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. 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.
5. Be open with your spouse.
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, your kid 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,” Tyagi says.
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.
Teri Cettina, freelance writer and a mom of two girls, also writes a family money blog: YourFamilyMoney.wordpress.com. This article originally appeared in Parenting magazine.