When it comes to money matters, many grown-ups are afraid to ask questions. Others are paralyzed by the fear of making mistakes. But we might prevent our children from falling into the same trap if we help them develop a healthy attitude toward asking questions about money, making decisions and correcting mistakes. Here are some suggestions on how to teach children about money:
1) Let your children listen in on problem-solving conversations related to money matters. Knowing that a grown-up asks questions about interest rates at the local bank or corrects errors on a phone bill or broker’s statement will give children encouragement to seek answers. It also demonstrates that it is OK to admit (by asking questions) that you don’t understand something.
2) Begin to familiarize your children with financial jargon such as interest, dividends, gains, losses, stocks, bonds, mutual funds, savings accounts, etc. Not knowing the meaning of financial words can be inhibiting to anyone, regardless of age. Go slowly – too much too soon can be overwhelming. (But too little too late can be just as much of a problem.)
3) Make it a weekly family project to look up one or two stocks in the newspaper. To monitor changes over time, keep a chart of price fluctuations. This way even the youngest child can get a sense of market changes, risk and reward. To make it more fun for your children, allow them to choose the stocks, preferably ones with whose products they are familiar – such as Coca- Cola, Pepsi, McDonald’s, Disney, etc.
4) Acquaint children with your own family budget.
5) Encourage your children to do comparison shopping on major purchases such as sports equipment, bikes, clothes, etc. Aside from real money savings, they will have a better understanding of the broad range of prices that different stores charge. As an added incentive, you may even want to “rebate” them a portion of the cost savings as a reward for their time and effort.
6) To instill a sense of social responsibility, you may want to encourage your youngsters to put away a small amount of their earnings or weekly allowance to be given to the less fortunate. Let them choose the charity. Perhaps they have watched one of the telethons on TV or had a friend or relative succumb to a serious disease.
Above all, remember: There is no such thing as a stupid question! Parents can help children learn about money and develop a positive attitude toward solving problems by showing them that asking questions is a good thing. Add to this familiarizing children with simple financial concepts and encouraging good habits from an early age, and they will be well on their way to a healthy self-image, confidence and a sense of adventure.