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Talking with kids about the money, is it important? When I was a child, my parents did not speak with me about money. Whether they did not want or did not feel that a child needs to be aware of money, I don’t know. But for some reason, money was a “dark side of the moon” for me.
Now when I am a grown man, I do understand how many mistakes I could avoid in my young age if I would be more aware of how money works. In my’ teens, I started working and earning my own money. I was splashing them here and there without any remorse. In my early 20’s I brought a new car worth my two annual salaries. I took loans for new TV, a new PC, a new audio system, etc. And just then I slowly started realising how bad all that was. I learned the lesson in a hard way, and it took me over five years to get out of the debt and get back on my foot.
Since I’ve got my kids, I always thought that I want them to avoid this hard way, and I felt the need of talking to them about money at an early age. But talking to a child about money seems to be hard and intimidating. Explaining the difference between needs and wants when they ask for a new toy, it feels like taking a childhood away from them. But when they have two cupboards full of toys, there is no other way just explaining how money comes. So how to keep this fair balance between spoiled and preserved? I was looking for an answer in the articles and books. Oh boy, how happy I was to read “The Opposite of Spoiled” by Ron Lieber. It was like a treasure chest of ideas and advises.
The short answer is “Yes”. All this book is about the importance of introducing your kids to money as soon as possible. Book covers the topics of spending, saving and sharing. It had plenty of real-life examples from different families with different financial situations.
Although the book was very repetitive and I feel it could be much shorter to deliver the message, some of the ideas were great, and I believe many people could use these ideas in their families to teach their kids moral values. Book is excellent at introducing charitable giving and teaching kids to help others who are less fortunate.
Also, it looks like it had way too many examples from wealthy families living in excess of everything. I would say book have tried to please too broad range of people. Still, no matter what financial situation is yours, you should be able to find answers that help to grow grounded and financially aware kids in your family.
When do you start talking about the money with your kids?
Most important is that it’s never too late. I did not think talking about the money with my kids until my older son have turned 4. At that age he started learning about coins in the school, so we were playing the games at home, like “shop “where he was “selling” for us his art creations, paintings, etc.
Researches have shown that it’s never too late to start talking with kids about the money. A study has found that kids are financially aware of young age, and parents are encouraged to speak with their kids about family finances, savings and investments. “And if parents aren’t talking with their kids about subjects like family finances or debt, the kids are drawing their own conclusions — which may not be accurate”. Earlier you start talking the better chances they have to do better with their money when they grow up.
How to talk with kids about the money?
As mentioned, we started talking very lightly. At the age of 4, we were playing money games. Once we understand the concept of buying and selling, we started looking at the prices in the shops. And we kept this way until questions began to arise.
Where the money comes from? We covered the topic that while kids are at the school, parents are at work. What we do for work earning money. Covered different professions and the importance of education if you want to get your dream job when you grow up. Explained that money earned hard and when money is gone, it’s gone.
At the age of 6, we have shown the receipts how much money everyday living cost — food price, etc. Explained about needs and wants, which made the most significant impact on how our son reacted to money. Significantly reduced requests for new toys since we started to recognise wants from needs.
And now the older son is 7, he started getting his weekly pocket money. To make sure that money won’t be spent unreasonably, we have used the famous “The Three Jars”.
What is The Three Jars? It’s a different way of having a piggy bank. Instead of opting to have one jar for all saved money, we use the three jars with each jar labelled as “Save”, “Spend” and “Share”. Now every week, my son gets his pocket money; he has to split them, the way he feels is right for him.
- Save – all money in this jar will generate 2% interest each month. Money from this jar cannot be used and must be saved indefinitely. P.S. interest rate can be revised once pot will grow too big for us and might be reduced at some point.
- Spend – this is the money he can spend on his “wants”. If he wants a new toy, better brand shoes or anything he likes.
- Share – this jar has raised most questions. Why do I need to share money with someone? We gave a very brief answer to this question. Maybe he knows a friend who didn’t get a gift for Christmas, or perhaps he wants to help homeless people, etc. We told him not to overthink about who he will help, just to know that when opportunity arises, he can help. We agreed if there will be no one who he knows that he can help, by the end of next year, he will donate money to the charity of his choice.
It was fascinating to see how he will split the money he has saved, and surprisingly 70% of the funds went in to “Save” jar because he understood that this would generate more money every month, 20% to “Share” and only 10% to “Spend”.
Even bigger surprise was when first weekend in the shop he decided to buy 53rd Pokemon toy for his collection and his reaction when we came back home. First of all, it took him 5 minutes in the store to choose which one he wants to buy. Doubts were based on the price of the toy. Finally, he brought the cheapest one, and when he came back home, he was upset. Because the boy realised that he spent nearly half of “Spend” money and actually he didn’t need this toy, because he has plenty of them already.
Lesson learned? Since then he did not mention any other toy for a month at least, and from pocket money, he did not put in to “Spend” jar even penny. Reason for this –”Anything I need, I have already. Anything I want can wait – it’s not important”.
Lessons and benefits teaching your kids about the money
Idea talking about money with my son wasn’t spontaneous, I was planning and looking forward to this for a long time. For my wife and me to see benefits appearing at such an early stage, was a big surprise.
- We don’t have to intimidate child with long talks every time he wants a new toy, and we don’t have to say we “no money” every time he wants something. Now, he has his own money and can buy what he likes. Needs and wants became very obvious to him, and the ability to decide if it’s worth to spend money or not, allowed him to feel more adult and to trust himself.
- We can see developing saving habits which should make him a much more financially confident person at the later stage of his life.
- His desire to share with less fortunate is very encouraging. Even now, when he doesn’t know who he wants to help, passion, he puts the money in to “Share” jar clearly shows that children are much more philanthropic than adults.
- He is now able to tell when the products cost more just because of the luxury packaging and often finds a cheaper deal for the same product with basic wrap. It led us to discussions about the environmental impact of human overconsumption, and we all now agree to limit our plastic usage.
- He was always good in math, but now he became even more passionate about numbers. He is counting interest earnings for his “Save” jar, with joy and excitement.
Talk to your kids about the money! Don’t hesitate and be confident. For some people, this can be daunting and stressful, but I believe benefits you will see when your kids grow up, will outweigh all these uncomfortable situations.
Talking with kids about the money, saving and giving can also be entertaining. Playing old dusty “Monopoly”, math games, having debates about money or any other life conversations can bring more precious moments for family together. And as we all know, there is nothing more valuable than TIME.