By Liz Pulliam Weston
Before we had our daughter, I thought financial education should begin somewhere in the grade-school years.
Clearly, I underestimated kids.
Our daughter, who's almost 5, has taught us that children are ready to learn about money as soon as they're old enough not to swallow it. And increasingly the evidence suggests that we shouldn't wait to begin teaching them.
Attempts to teach financial literacy to high-schoolers aren't working. The courses, which are sometimes touted as a cure for rampant money mismanagement in our society, don't seem to improve high-schoolers' money savvy at all, according to research by leading financial literacy expert Lewis Mandell, professor at SUNY Buffalo School of Management.
Even middle-schoolers are often resistant to messages that contradict the pervasive messages to consume that they get from advertising and their peers.
Catching kids younger, and instilling habits like saving, may be the key to money lessons that actually take.
"It may be more indoctrination than education," Mandell speculated. "They need to know things like, 'saving is good.'"
Advertisers certainly have no compunctions about targeting preschoolers, noted Sam X Renick, a former financial services executive whose company, It's a Habit, publishes money books and music for kids. Parents need to push back against those messages, he said, and teach kids the basics "before they're too cool" to listen.
Renick's Web site and the "Thrive by Five" resources offered by the Credit Union National Association are great places for parents to pick up ideas and resources for teaching preschoolers about money.
I've combined some of those lessons with my own experience to come up with these five money lessons your child should understand by kindergarten.
Money can be spent, saved and shared
The first concept -- that money can be used to buy things -- is the easiest of the bunch. Our daughter had it down by age 3 1/2, which is when we not coincidentally started her allowance (more on that later). It took a bit longer for her to grasp the concept of putting money aside to be spent later. And sharing … well, we're still working on that. It's mandatory in our household, but like peas, it's not much appreciated.
Piggybanks, by the way, can help with all these concepts. When she was 2 and delighted in stacking and naming coins, we gave her piggybanks with removable plugs so she could put money in and take it back out again. Now that she's a little older we use a Moonjar, which has sections for spending, saving and sharing, although I also like the four-section Money Savvy Pig as well as the Amazing Money Jar, which counts coins as they're deposited.
Saving should be a habit
Developmental experts agree that by the time most children are 4 or 5, you can teach them about saving by helping them put aside money for a goal, such as a toy they want to buy. (A savings chart can help.) But you can actually start instilling the habit of saving even earlier by simply making it mandatory: A portion of any money they get is put aside for "later."
As Renick's signature cartoon character, Sammy Rabbit, puts it: "Out of every dollar, save a dime." Having a specific goal isn't necessary; it's the habit of saving automatically that's important.
Once money is spent, it's gone
Kids naturally think of money as an ever-renewing resource. It's always sprouting out of their parents' wallets, isn't it? The idea that money is a finite resource starts with learning that a dollar spent is a dollar gone for good.
And the best way to teach that is to let kids spend money. Give them a buck at the dollar store, let them pick out something, let them pay for it. The first few times they may be surprised that they can't use the same dollar to buy something else, or that you won't cough up another buck if they change their minds after they've bought. Stick to your guns, though, and the message gets across.
People have to make choices with money
Since this a lesson many adults have a tough time learning, we shouldn't expect preschoolers to have a perfect grasp of it. But it's an extension of the money-is-finite concept that's essential to learn.
We're teaching this by giving our daughter a weekly allowance. She's allowed to select how she spends it, within limits. Once the money's gone she has to wait until the next week to get more. If she decides to blow it the first day on little rubber snakes -- and she often does -- that cool keychain she wants the next day has to be passed up. We're hoping to cut back to biweekly and then monthly payments as she gets older to give her more real-world experience in managing her money over time.
We also talk to her about how we choose to spend money: on fun vacations, for example, rather than on fancy cars.
Don't trust ads
This is another lesson that may take years to really sink in, but you want to at least plant the seed of skepticism in your little one. The first task will be simply distinguishing commercials from shows; a 2-year-old probably won't be able to tell them apart, but a 4-year-old probably can. (Ours has taken to shrieking "Commercial!" with equal parts horror and contempt when they come on.)
We've told her that commercials are designed to try to sell her stuff she doesn't really need and that probably isn't as neat as it's depicted. But mostly, we try to limit how many commercials she sees (thank heavens for DVDs and TiVo).
Teaching tips
As you're teaching, keep the following in mind:
- Keep it fun. Games, songs, coloring books and smiling piggybanks are great tools for teaching about money. So are discussions with your budding financial genius, but your tone should be light and conversational, not doom and gloom.
- Seize the teachable moments. Daily life offers all kinds of opportunities to talk about money. At the grocery store, you can talk about how you shop from a list to make sure you get the things you need and save money by not buying things you don't. At the bank, you can talk about how you put money into your account so you can get it out later to spend.
- Keep it simple. The older kids get, the more questions they'll ask about money -- and some of them will be stumpers. Try to keep your answers simple, and look for signs that the child's attention is wandering . . . you'll know lesson time is up.
Columns by Liz Pulliam Weston
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