Money Matters

A couple weeks ago, Rachel came home from her horseback riding lesson in tears.  Basically, the pony she was used to riding was getting ready to leave the stable because nobody was leasing him and the owner of the stable just couldn't afford to keep him.  She, of course, asked if we could lease him in an effort to "save him."  We just had to be honest and tell her no because we can't afford it. As parents, we want to give our kids everything, but sometimes that's just not possible and it's important for them to understand that, I think.

However, the whole concept of money is difficult for kids to grasp.  Once, my Megan wanted something and when we said we can't afford it her response was "Well, just go to that machine where you put your card in and get some money out!"  They think it is that simple.  They think that moms and dads just automatically have money.  They give no thought as to where that money comes from.

Money management skills are, obviously, a very important life skill that everyone needs to learn.  I even told my daughters that in my Lessons I Want To Teach My Daughters post.  The question is how do we do it??  Well, I'm definitely no financial expert, but here are my suggestions.

1)  Don't be afraid to discuss money with your kids.  As part of the conversation about leasing the horse, my hubby actually ended up listing for Rachel all the bills we pay each month.  "Daddy gets a paycheck.  Out of the money in that paycheck we have to subtract money we pay for our car, our house, electricity, riding lessons, preschool, etc.  Also factor in 'spending' money for groceries, gas, doctor and dentist appointments, birthday presents, and anything else we end up needing."  (He actually gave her a very thorough list.)  Kids don't realize the ongoing nature of bills.  Once we drove home with the new van, it was paid for, right??  You mean we actually have to pay for the lights to come on??

2) Help kids understand the actual value of money.  My kids are 9, 7, and 4.  To them, $100 is a lot of money.  As adults, we know that $100 won't even buy the groceries to feed my family for a week.  Although we don't want to make our kids stressed out about finances, it is important that they have a real concept of numbers.  Tell them how much the grocery bill was for the week.  Tell them how much riding lessons and preschool cost each month.  As their concept of number value increases, they will have a better understanding of just how far a buck will go (or won't go!). 

3)  Be honest.  There is no shame in admitting that you just simply can't afford to buy some things.  It might be something big (like the fancy vacation one of their friends just took) or it could be something small (a new, cool pair of shoes they don't actually need).  I think this helps them realize that money is not limitless and that there is a budget.  It is also a good way to introduce the concept of planning and saving.  For example, "We can't afford to get a new Wii game right now, but if you save your allowance/birthday money to pay for half, we can probably get one next month."

4) That leads to the next point - helping them learn to manage money on a small scale.  My kids don't get an allowance, but they do get birthday money, money for lost teeth, Christmas money etc.  Megan saves all her money and is very reluctant to spend any of it.  After Christmas, she wanted to use some of her money to buy clothes for a doll she got.  When we went to the store, checked the price, and she realized that she would only have a few dollars left if she bought the clothes, she decided against it.  On the other hand, when Rachel gets money, it seems to burn a hole in her pocket until she finds a way to spend it.  She even says she wishes she could get a job so she would have her own money to buy things she wants.  It is our job as parents to guide them.  This may actually include letting them make some mistakes from time to time.  It also includes teaching them how to save up for something they want (maybe even give them some extra chores to earn some cash).  We need to teach them, too, about giving to others when we can.  Finally we have to teach them how to spend responsibly.  

5)  My last tip is that, like everything else, parents have to set a good example when it comes to money management.  If parents spend recklessly, they are not teaching their kids to set spending limits, etc.  Conversely, if parents plan, budget, and talk to their kids honestly, they will set an example that, hopefully, their kids will follow.

Like I said, I am no financial expert.  DW and I have made some money mistakes, but we have learned from those mistakes.  I hope that we can set a good example and build a solid foundation for our girls so that, when facing the "real world" of economics and budgets, they are educated and prepared.

For additional help, there are actually lots of books for kids about money like this one and and entire series by Dave Ramsey in which "Junior" learns about saving, debt, investing, and more!

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