As someone who is experiencing the joys of sharing a living space with a toddler (and sharing my physical body with another tiny, growing human), I know first hand the exhaustion that we experience as parents. Of course, there’s the adventures, fun, cute memories and things they say, but at this stage in life, being routinely tired is a part of every day.
This exhaustion can make it easy to think that there are lessons we can skip over, push to a later date, or trust that our children will just “pick up” on their own without our guidance. The topic this most often occurs with? Money.
The fact is whether you like it or not, your children are going to learn about money from you. They’re going to shape their beliefs and thoughts around finances from your action or inaction on the topic. Money scripts, which are the unconscious, trans-generational beliefs about money, that we develop in childhood and drive adult financial behaviors, impact each of us (and you probably have some of your own that you’re still dealing with). It’s up to you on whether those scripts are positive or negative for your children.
With young children, it’s easy to want to defer teaching them about personal finances, but children begin to understand the concepts of delayed gratification, working for money, exchanging something for value, and saving from an early age. This makes it even more important to introduce the topic early.
If you’re not sure where to start when it comes to teaching your little ones about money, here are a few ideas that we’re rolling out (or plan to roll out) in our household:
Monkey see (or hear) – monkey do
It’s no secret that our little ones are watching us closely and picking up on our actions and the things we say (even the things we wish we could take back). If you’re finding yourself stressed about money, talking negatively about it, complaining, always pulling out your credit card, or clipping coupons before going to the grocery store, chances are your child is picking up on those cues as well and will begin to mimic you. Our daughter loves to shove old hotel room keys into her pretend purse and pull them out as her credit cards when she goes “grocery shopping.” Does she know what she’s doing and the implications? Nope. Is she copying mommy and daddy’s actions? Yes. As parents, we’re in a unique position to positively or negatively influence our children’s beliefs around money, and the best thing we can do is begin to shape consistent, positive and educational messages surrounding the topic from an early age. This can range from having your child help you count money in your wallet, letting them look over your shoulder as you pay bills, allowing them to hand the money to a cashier, or hearing you talk about saving up for your next family trip or toy purchase.
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Leverage a “rewards” jar for saving
Trying to teach a 3-year-old the value of a dollar versus a five dollar bill can be slightly tedious. Teaching them how to save and cash in rewards for bigger prizes and toys though, can be a bit more fun. Research shows that children who can exercise delayed gratification and impulse control will fare better financially as adults because they have better savings habits. A great way to start teaching these skills is with a “rewards” jar. Essentially, you set up a plastic jar or container in a spot that is visible to your child. Each time they perform a chore or task (perhaps putting their dishes in the sink or clothes in the hamper) or do something earning praise, you place a cotton ball (or we use craft pom poms in our house) in the jar. After placing the reward in the jar, you explain to little Susie or Jimmy that they are saving their rewards to exchange for a bigger prize. They can cash five pom poms in for a popsicle, ten in for a trip to frozen yogurt, twenty in for a toy, etc. You set the exchange rate and prizes, but this begins to teach them the value of exchange and let them consider their options and make choices on cashing in now versus later. Note: Go the plastic jar and cotton ball/pom-pom route since chances are your little one will want to count and re-count the contents on a daily basis.
The best thing you can do for your child is not giving them everything they ask for. If you’re heading to the grocery store, let them help you make a list and cross off items as you get them. Have them repeat with you what you will be purchasing and also what you won’t be buying. If you’re shopping for a birthday gift, let them know specifically who you are buying for and note that you will not be purchasing anything for them today. Don’t make a fuss of saying “we don’t have the money for (insert toy name here)” but instead lay it out from the beginning. This helps to teach your little one that a trip to Walmart doesn’t always mean they get something.
Use play money
On a recent trip to Target, I found a bag of felt money and coins for $3.00 in the infamous “dollar section.” That little bag has helped us to teach our daughter about counting, bills, coins, exchange value, gifting and more. She may not totally understand the concepts, but she can choose who she wants to “share” the money with, can say “yes” or “no” when friends and family ask her for money and can throw it all up in the air in celebration if she wants to. Getting her into the habit of talking about her money and being able to make her own decisions with it (regardless of its actual purchasing power) sets the stage for her to become more comfortable with advanced conversations around the topic as she gets older.
The three-jar method has been touted for a long time as a way to teach children how to save, spend and share. If you choose to start using an allowance (and actual dollar bills) with your little one, give them options for how to use it. Whether it’s saving for a more significant goal, making a purchase now, or sharing their financial gains with another (like a charity or a sibling), this is a great way to teach a balanced approach to money. It also starts the conversation about why we save or why we help others, and how it makes us feel. Again, it’s about starting the conversation.
As your children mature, there will be opportunities for more advanced lessons and conversations around personal finances. However, it’s never too early to introduce the topic with them. It can be taking time while they’re young to ensure that you’re practicing and paying attention to what you say and do around money. Or, beginning to assign small chores like cleaning up toys or clearing plates in exchange for a reward. The best thing you can do for your child’s financial future is to start talking about and addressing it now. The more comfortable you are with the topic, the more comfortable they’ll be as well. And chances are, both of your future bank account balances will thank you for it.
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Mary Beth Storjohann, CFP® and Founder of Workable Wealth, is an author, financial planner and accountability working to help clients in their 20s-40s across the country make smart, educated choices with their money. Her recent accolades include the “Top 40 Under 40” by Investment News, “10 young Advisors to Watch” by Financial Advisor Magazine, and “10 of the Best Personal Finance Experts on Twitter.” She frequently appears on NBC as a financial expert and her expertise has been featured in The Wall Street Journal, CNBC, Forbes and more.