I remember back in the 1973 when I worked my first summer job. I was all of 15 years of age. I was getting paid to sort rivets in an aircraft sheet metal shop. The work was tedious, but the pay wasn’t all that bad – I think that I was paid $7/hour (back then that was a decent wage for a 15 year old).
Did I save any money that summer? Not one cent! My parents suggested that I should save some of it, but I thought that money grew on trees back then. Little did I realize that putting aside money was a wise thing to do. I, like many other kids of that generation, believed that money was meant to be spent not saved. Now when I look back, I realize that even if I would have saved $5/day, I would have had $300 saved at the end of the summer.
Please do your kid a favor this summer. When your kid gets his or her first pay check, sit down with your child and help him or her set a savings goal. Get your child to calculate how much could be saved over the course of the summer if $5, $10, or even $20 was saved every day. Once the calculation is made, your child will see what is possible by saving a certain amount every payday. By undertaking this activity with your child, you might be setting up your kid for a lifelong habit of saving. That wouldn’t be so bad, would it? After all, learning to be financially literate is all about acquiring knowledge, putting it into practice, and reaping the rewards.
The best lessons that I ever learned about financial responsibility were from my Mom and Dad at the kitchen table. They taught me:
The value of money
How to spend wisely
How to save
Even though, I was taught these lessons in the late 1960s and 1970s; I firmly believe these are still valuable lessons that every kid must learn, if he or she is to be financially literate.
The Value of Money
I was taught at an early age that money doesn’t grow on trees. Nowadays, some kids seem to think that an infinite amount of money comes from ATMs. There is a story going around on the internet (probably an urban legend), about a young teenager who attacked an ATM when it wouldn’t give her any money, because there was no money left in her bank account. Little did she realize that the amount in her bank account was directly linked to the amount of money that she could withdraw from the ATM. She thought that the machine printed money and that she had an unending supply at her disposal. Obviously, she needs a lesson in the value of money!
The easiest way to teach your children about the value of money is to give them an allowance for chores performed around the house. By tying their allowance to their chores, you are teaching them that money is a means of rewarding people for the work that they perform.
Spending Wisely
Teaching a child how to spend his or her money has to be one of the most difficult things to do. For many of us, our first inclination is to tell the child what the money can or should be spent on. Try giving up that urge to control your child’s spending habits; your job is to guide your child in the decision making process. There will be times when your child will spend his or her money foolish, but treat that as a learning experience. Fight the urge to rescue your child – don’t give him or her more money; after all you don’t get extra money if you overspend.
Saving
Getting into the habit of saving money at an early age will pay off in the long run. I strongly suggest that you go to a bank with your child and open an account in his/her name. The idea behind this, is to teach your child to save for a rainy day. Too many adults have never gotten into this habit and unfortunately they find themselves living pay check to paycheck. Habits started at an early age often continue into adulthood, thus ensuring that your child will have some cash in the bank.
Bank accounts can also be used by your child to save for that special ‘something’ that he or she wants but doesn’t have the money for. Simply put, it teaches them not to be impulse buyers.
Many parents think that they have to be financial experts to teach their kids about money, but you don’t! Teaching your kid about money is all about common sense.
Last week, a national organization that devotes its energies to teaching kids about money came to my school. The teachers at the school were quite excited, because financial experts were coming to teach the kids about money. I know what you’re thinking – ‘But, Steve, you’re an expert on financial literacy, why don’t you teach it?” Simply put, sometimes the kids (and teachers) will listen to outside experts, rather than the one that works in the building.
Teachers had been polled last year about bringing this organization into the school. I suggested very strongly, that even though the organization teaches about financial literacy, their program might not be appropriate for junior high students (I had heard from an accountant that the program was more appropriate for high school students). The other teachers didn’t listen and voted to bring the program in.
I sat in on one of the sessions. The presenter talked to the kids about needs and wants – a concept that every financially literate individual must understand. The kids were quite involved in this lesson. They ended up having a great discussion about when a want becomes a need. Unfortunately, I could only partake in the lesson for a few minutes. As I was leaving, the presenter started talking about interest rates; I wondered if the kids would be able to grasp the concept. Little did I realize, that later in the day, the kids would let me know what they thought about that lesson.
That afternoon, I had a class of grade 8 students that had participated in the sessions. I was curious to find out what they thought of the program. One student said it best: “It really wasn’t relevant to our lives. At one point the presenter talked about ‘zero down, zero interest, and zero payments for 12 months’. What does that have to do with teenagers?” The student hit the nail on the head – lessons have to be relevant to the student. Obviously, the organization had forgotten one of the most important rules of teaching – know your audience.
What topics do you think should be covered in financial literacy courses for the following groups: junior high kids, senior high kids, and university/college students? What should elementary school kids be taught about money? Let me know what you think by leaving your comments in the comment box below.
How do you teach your child to plan for the future in a society that values instant gratification?
Society says: If you want a big screen TV, put it on your credit card. If you want a new house, get a huge mortgage that you can just barely afford.
Kids imitate what adults do. You, the adult, have to set an example for your child. Kids need to understand the consequences of good and bad planning. Good planning means setting money aside on a weekly or monthly basis for that big ticket item you want. Bad planning refers to being in debt up to your ears.
Are your kids going to be mooching off of you when they are in their mid-thirties or even older? Picture yourself loaning money to your 35 year old on an ongoing basis, because your adult child has no idea how to manage his or her own money. What do you think the chances of getting your money back are? How much money could you fork out to your adult child, without your finances being impacted negatively?
Please don’t get me wrong; there are times that you might have to help your 35 year old financially when he or she is in a bind. However; there are some adult children who seem to think that the Bank of Mommy and Daddy are their own personal bank machines. In essence, they are expecting to receive an allowance from their parents. Not a pretty picture, eh?
The key to avoiding such a scenario is to educate your child about money at an early age. Financial literacy is a difficult to learn, because it is a combination of knowledge, skill, and personal values. Our school system does not often do justice to this topic. Let’s face it; most teachers are not financial experts. Parents, you play an essential role by imparting your values to your kids, but do you have the necessary knowledge to teach them the ‘hows’ and ‘whys’ of financial management? Some of you do, many of you don’t – so who do you turn to? I’m here to help you teach your kids about money. I encourage you to subscribe to this blog by clicking here, we’ll work together to help your kid become financially literate.
I came across this blog as I was going through my Twitter account today. This article by Alexis Holloway at Blogging For Change is one of the best articles that I have read about teaching teenagers the ins and outs of money. Please take the time to read it; you will be a little bit wiser after reading it.
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I’m amazed at a story I heard recently. A young lady was angry at an ATM (ABM), because it wouldn’t give her any money. Little did she realize that the machine would only pump out money if there was money in her bank account. She seemed to think that by putting her bank card into the machine that she had an unlimited supply of money. The sad thing is that this actually happened. What is even sadder is that this person had absolutely no concept of how money works.
Kids have to understand the concept that money does not grow on trees. Simply handing money to a child, without having to exert any effort gives the child a sense of entitlement. This defeats the purpose of teaching a child to be financially literate. One of the best ways to teach a child about financial literacy is to give a child an allowance, but only if it is linked to completing chores. An allowance will help the child understand the link between work and money – work is exchanged for money; money can then be exchanged for good or services. Once the child understands this link encourage him/her to spend or save it as he/she sees fit. If the child overspends do not step in – a lesson has to be learned about living within one’s means – the earlier it starts the better. Financial literacy is a combination of behavior modification and understanding how money works. If you understand these two concepts you are well on the way to handling your money effectively.
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Teaching Your Kid is a blog for parents who want to teach their kids what isn’t taught in school. I’m not talking about reading, writing, and arithmetic. Rather; I’m talking about basic skills that are so important in today’s society – financial literacy, entrepreneurial skills, effective and appropriate use of technology, etc.
Let’s face it, the educational system does not often have the time nor the expertise to tackle these important life skills. If the schools can’t help you, who do you turn to? The experts? Where do you find them? The internet? Good luck! Searching the term ‘financial literacy’ on Google brought back 8.5 million hits. Are you willing to waste your time sifting through all of these hits?
Consider Teaching Your Kid as your main source of information for your kid’s life skills development. You can rely on the knowledge and expertise of main contributor, Steve Gillis, and the team at Net Learning Solutions Inc to help you teach your kid the life skills that are not taught in schools.
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