3 Kids and Us

For parents, the message and motivation is simple: if you don’t take the time to teach your kids about money, then something or someone else will — and those lessons are likely to be financially costly and emotionally painful.

What’s more, unlike talking about that other subject (yes, you know the one — birds and bees and all of that stuff), discussing money doesn’t need to be uncomfortable or awkward.

Instead, talking to your kids about money can be fun and interesting — not just for them, but for you, too. Here are three suggestions:

1. Take your kids food shopping and make them part of the process from purchasing to paying.

Understandably, most parents who take their young kids food shopping have one clear goal in mind: get in and get out as quickly as possible, and with a minimum amount of whining, complaining, and “if you don’t start behaving right now then no TV for a week!” threats.

However, one way to get kids interested in the experience and boost their budding financial literacy, is by coaching them to be part of the process. Help them understand how similar products have different prices, and why some products like milk and butter are cheaper than others like imported fruits and pine nuts. And when it comes to paying, help them see — or better yet, let them handle — the transaction, so they can start understanding how the system works.

2. Use rewards and incentives to help kids pay themselves first.

In the financial world for grown-ups, a new and better way of looking at saving these days is to “pay yourself first”. In a similar sense, you can help your kids appreciate this fundamentally important aspect by using rewards and incentives for them to save more and spend less.

For example, if Santa Claus had your child on the good list (even after that “incident” with the grape juice) and handed him or her a $20 bill at Christmas, then you might offer to match their savings dollar-for-dollar after two or three months. Or, if your child has their heart set on something that costs more than they have available — like a new bike — then you can offer to help them reach their goal if they take the lead by being a smart, diligent saver who pays themselves first.

3. Stop giving allowances, and start giving commissions.

The time-honored practice of giving kids a weekly allowance is well-intentioned, but can actually be counterproductive if it encourages kids to believe that when they get older, a regular dose of money will magically appear.

To avoid setting your kids up for dismay and disappointment — and maybe some big financial losses later in life that are rooted in a sense of entitlement — stop giving allowances, and start giving commissions. For example, you can give out a basic amount for completing normal, age-appropriate chores (for 5-6 year-olds, this might be making their bed in the morning each day and putting away toys after play, for 7-8 year-olds it could be tasks like helping around the house, and so on).

It’s also important to tie commission to performance. If your child over-delivers and goes above and beyond, then boost the amount with a one-time bonus, or give them a raise if it’s something they’ve been doing for a while. Conversely, if they don’t meet a basic standard, then let them know that it’s going to cost them. Make sure that the message is consistent and clear, like a giant full-color banner from the Landmark Sign Company.

The Bottom Line

Teaching your kids about money doesn’t have to be difficult or full of angry statements like “money doesn’t go on trees!” Instead, it can be fun, interesting and most importantly: very profitable for your kids, and indeed, for your whole family.