‘Tis the Season to Teach Your Kids Money Sense!
Reading Time: 9 minutes Listen to the podcast version:
Invest in Good Habits—Teach Your Kids about Money This Holiday Season!
Financial literacy is a subject we should have all been taught. As parent, we recognize the need to teach our children. Yet, it is easy to overlook giving our children important money skills due to the busy of life that we get caught up in. Often we assume that they will “learn it all” when they get their first job and simply catch on. After all, you caught on and are doing “all right”, right? I find it funny that 73% of teens said that they wanted more personal finance education in 2021.
When have you heard of teens saying they wanted more education? Even our teens recognize that this is a worthwhile subject and they want more!
The holidays are a perfect time to start or reinforce financial teaching.
There is a lot you can do to prepare your children before the holidays.
If you want to jump straight to the Holiday Lessons, go here!
1. Start with the Basics
If your children are young, ages 3-6, they need to be introduced to concepts that relate to money.
Counting and Basic Math
A child will need to understand that there are 5 pennies in one nickel when they start identifying coins.
In order to understand this they need to be able to count and understand values, 5 is larger than 1.
Coins and Bills
Once a child can count and understands the value of a number, you can introduce coins.
They will need to learn that a quarter is 25 pennies, a $1 bill is one hundred pennies, and a $5 bill is 5 $1 bills.
At first this could be confusing if they don’t understand the value of the money.
25 is much larger than 5, so why isn’t the quarter worth more than the $5 bill?
These are simple foundations to teach your child that will lead to financial literacy.
There are a lot of fun money games you can play with your child that reinforce these concepts.
When I wrote that article I did not know about Trend Enterprises: Money Bingo Game (on Amazon).
I like this one over all of the ones you can download off of people’s websites simply because it has a card you draw that has an amount, .22 for example.
The child then has to match on their card that amount in coins.
Children start “seeing” money in amounts.
2. Grow from number to coin Concepts
Your children are becoming more savvy when it comes to money.
Usually children between the ages of 7-12 know that if they have it, they can use to purchase “stuff” they want that you may not be willing to buy for them.
You may have put in place a type of allowance or monetary rewards system in your home.
Children have learned values and can identify coins.
They should be learning greater and less than values.
They should also be able to learn to make change.
Math is much more fun when it has a practical application.
Compiling bills and coins to buy something or making change is a great way for them to practice math skills.
3. Looking for Opportunity
I was just with my nieces.
One of them is 11.
She is at this stage; she is looking for every opportunity she can to make and save money so that she can decide what she will do with all of her money.
I was amazed at the amount of money she made when she and her sister set up a lemonade and water stand “en route” to a local golf tournament.
Her father even taught her how to subtract all expenses, before calculating how much she made.
Then we went out to a favorite restaurant that the family has been going to for years.
The owners know the family and have watched my niece grow up.
She asked when she could get a job there.
They had a conversation, right that at the table about when she could start bussing tables and what that would look like!
At this stage, your child understands how money works.
Now you want to give him the tools to spend wisely.
If you are at a loss, thinking you have no idea where to start a financial education for your child, think of where a lot of adults flounder…the holidays!
The holidays are a fun time.
They are the time when we give.
Every media outlet is telling us to buy and spend.
We are enticed with the “new and shiny” that we just have to have.
4. Needs vs Wants
This sounds so basic, of course you know what a need vs a want is, right?
Either we do not know the difference between these two or we, as Americans, have very little willpower.
During the 2021 holiday season a LendingTree survey found that more than a third of consumers (36%) incurred holiday debt this season, averaging $1,249
Teach your child to differentiate between needs and wants.
Wants are not bad.
However, we always prioritize needs.
Then we save up our extra money to spend on wants.
This way you are not villainizing wants and you are encouraging spending what you have.
5. Savings
There are many ways to introduce saving money.
When children are young, they may like to actively see the money enter a jar or piggy bank.
If your child is focused on electronics and/or gets money form relatives for birthdays or holidays, a money savings app would be a lot of fun for them to use.
I love these because many offer allowance, education, charity, investing, and more.
Regardless of what you and your child choose, your child should be encouraged to save some of their money.
6. Goals
This could be wants, dreams, wishes, or goals.
What does your child want to spend their money on?
It could be in a month or in 5 years.
You could offer to match them towards a large goal, like a bike, trip to a friend or cousin who lives out of town, or even their first car.
The money has a much better chance of not being spend on (you name it, the latest fun gizmo) if it is in a savings account of some sort.
This is true with adults as well-even though I have the best intentions, if I don’t move that $100 from checking to savings to go towards holiday spending in June, July, and August, I won’t have an extra $300 in my checking…I just won’t.
Are you looking for a super simple way for your child to track their expenses?
This holiday checklist helps children see who, what, where, and how much for each gift easily.
They will be rockstars at holiday spending if they use this!
Encourage your child to make a goal, knowing that they can always change their mind.
These four steps are all done before you head into the holidays.
We are going to use gift giving and holiday spending as a financial literacy lesson for our kiddos.
However, it is important that we are at a similar staring point:
1. Our children understand how money works.
2. They know the difference between wants and needs.
3. They have a savings account or are ready to get one.
4. They know what to set goals.
Before the crazy consumerism begins, talk with your child and acknowledge these things.
None of these are bad, like needs vs. wants, they just are.
Let’s take some steps so that your child can come out of the holidays feeling great, while still meeting their goals and learning how to spend wisely in the process.
It will be much easier to go holiday shopping if they know who they are trying to find gifts for.
You have heard the expression, “Don’t go to the grocery store hungry?
It is also dangerous to your time, focus, and wallet if you don’t go holiday shopping armed with the who.
2. Budget
How much money do they want to spend on each person?
This is a great time to talk about gifts that are personal vs. gifts that are “easy” or “popular.”
Your child may be able to make a homemade gift of origami for example, that represents each person they are giving a gift to.
The total cost for the paper and maybe a homemade card may total $4.
While getting a box of chocolates may be $9 each and it is not personal.
*If your child is older, walk them through your holiday budget.
You need to account for food, decorations, activities, possible travel, and gifts.
It is good for them to se that you do this to remain financially responsible.
In order to afford these things during the holiday season, when do you start putting money away?
What would you, as a family, have to sacrifice, if you did not wisely budget your money?
Have you had trouble with over spending during this time?
Have you faced overwhelming debt?
Have credit cards and interest rates made life difficult for you?
Have you faced the struggle of trying to rebuild your credit?
If you have faced any of these, you have “in the trenches” experience to call on to help your child, especially if you were able to overcome these issues.
Do not be afraid to tell your child how these struggles affected you and how you overcame them or how you are still dealing with them.
3. Needs vs Wants
I love this topic under gift giving.
Remember the days when it was “awful” to get a dishwasher from your husband for your birthday?
Sometimes we really need something, we may not even notice.
If your children have enough time, turn them into secret agents.
Have them notice every little thing about the people on their list.
Has grandma commented that she just can’t snip the thread anymore and her scissors are not very sharp?
Or has dad commented that he can never find a pail to mix the soil in for outside?
While these gifts are not flashy, they are very thoughtful, especially when combined with a lovely hand made card.
4. Comparison Shopping
This section is hard for me to write, but it is legitimate.
I love my brick and mortar small business owners.
If you can, please support them.
They may be a bit more, but they are the ones that provide all of the soccer shirts, sponsorships, and donations so that you and your family can enjoy the wonderful activities in your town.
If your child is trying to make their dollar go as far as it can, have them look for deals before they buy.
Compare different stores to each other.
Compare the same store’s online prices to their prices in the store.
If they find the online prices are less, ask the store if they will match the price.
5. Cash
I wonder is cash truly is king anymore!
It seems everyone wants a credit card payment.
When a child (or adult for that matter), has to actually peel away one of their three 20 dollar bills and only gets $5 back, they feel it.
They know they are down a lot of money.
If they just “run a card” they have no idea how much they are spending.
There is a reason cruises, resorts, hotels, etc. like you to use a “cashless” system and charge it to your account or room.
You are stunned when after three days you owe over $750!
If you had given actual cash after each expense, we both know you would have slowed that spending way down!
Teaching your children about money is an ongoing process. Use holiday shopping as a practical and engaging way to introduce budgeting, needs vs wants, comparison shopping and only spending what you have. After your children have had a real life experience you will be able to easily reinforce these concepts throughout the year.