Teaching Personal Finance in Everyday Activities

Ideas: Financial Literacy in Your Family's Everyday Activities

While there are a lot of games and activities out there that will give your children experience with important financial principles, one of the best ways to impart financial wisdom is to capitalize on opportunities you find in your everyday life as a family. Not sure what to do when you see an opening? Here are a few ideas:

• Think Aloud – one of the tough things about teaching financial decision ­making skills is that so much of the process takes place in our heads, where our children can’t see or hear it happening. An easy way to teach your children about making money choices is to speak your thoughts in their presence.For example, if you’re considering making a large purchase, say aloud: “Hmmm, this item is pretty expensive. Do we want it or do we need it? To afford it, we can cut back on eating out and buying new clothes for a few months.”
• Explain – kids love learning about how the world works, so take advantage of their curiosity and provide explanations to money questions (whether your kids ask or not) whenever they pop up.For example, when you stop to get money from the ATM, explain to your child that the money may be held in a machine, but it’s coming out of your checking account. Follow up by explaining that it’s important to be sure there’s enough money in your account to cover the withdrawal. From there, your child will probably ask more questions – answer in as much detail as you can.
• Include – kids learn best when they feel that topics are relevant to them. One way to make financial topics personal is to include kids in money conversations and decisions, especially if the question relates to something they value.For example, when you’re at the grocery store comparing products, ask your child: “do you think we need the name­ brand cookies for your lunch, or will the store brand be ok? We’d save $1.50 if we pick the store brand.”

Making Money Fun: Ideas for Making Financial Lessons More Engaging

A big hurdle that parents face when trying to teach their children financial lessons is the “boredom” factor. Many kids – and adults, too – find money to be a tiresome, snooze ­inducing topic. It’s difficult to make kids pay attention to subjects they’re not interested in, so it’s crucial to make the money tutorials you conduct with your children as engaging as possible.

Getting Started: Ideas to Teach the Money Basics

If you’re not sure where to start, take a look at the ideas below. We’ve come up with several good examples of how to making learning about earning, spending, and saving money fun for your kids – and for you, too!

Earning – It’s hard to make money relevant to your kids if they’re not earning any of their own. If your child is too young to take on a part­ time job, here are a few unique and fun ways for them to bring in some cash:

• Taking care of neighbors’ pets; most children are natural animal­ lovers, so if your kids are old enough to handle the responsibility, suggest that they approach trustworthy neighbors to see if they need pet ­sitting services.
• Tutoring younger children; if your child has a special skill – such as playing the piano or using a computer program – she may be able tutor other children for a fee.
• Collecting unused household items for resale; if you have unused books or DVDs around your home, have your child collect them and list them for resale online. In exchange for doing the legwork, let her keep the profits.
• Cooking or baking; if your child is good at baking or making another treat, try to make arrangements with a local business to sell her goods.

Spending – Lecturing you children on the value of comparison shopping and finding the best prices is probably futile, but you can make this lesson more fun by using games:

• Create a friendly competition; if you have more than one child, stage a friendly competition between the two when you go to the grocery store. Give each child a list of items the family needs, and challenge them to find all the products for the lowest possible price. Allow them to make substitutions, and give the child whose total bill is lower a small prize.
• Go virtual; there are lots of interesting games online that teach children how to spend smart. For example, check out the Mad Money game from PBS, which teaches kids about making good spending choices.

Saving – emphasizing the importance of putting money aside will likely fall on deaf ears if your child doesn’t have the ability to see the rewards that a regular habit of saving confers. Make it easier for your child to get excited about saving with these tips:

• Make a paper chain; turn a common debt­payoff motivator on its head by having your child start a paper chain, where every link on the chain represents $25. It will be easy for her to see the progress she’s making as the chain grows.
• Match their hard work; if you can afford it, match your child’s savings. This will encourage her to keep saving!
• Celebrate; kids are used to celebrating holidays and birthdays, but achieving savings milestones should be recognized, too. Have your child set a savings goal, and when she reaches it, bring home a cake for the family as a surprise. Be sure to make a really big deal about how special it is to have reached a financial goal.

Money By The Ages: Key Financial Concepts To Teach As They Grow

One of the greatest challenges to raising money ­smart kids is providing age appropriate instruction about key financial concepts. It’s important that children are being challenged and engaged, but getting too technical too early will create frustration and cause them to tune out important information.

For guidance about what kids need to know about earning, spending, saving, and giving on an age-by-­age basis, check out the information below.

Elementary Ages 6­-10: Laying The Groundwork

Your primary concern with pre-­adolescent children when it comes to teaching them about money should be creating a foundation of responsible behaviors and sparking an interest in learning more about the fundamentals of personal finance. To do so, consider the following:

Earning – At this age, children need to understand that people earn money by going to work, and that some earn more money than others because of the jobs they’ve chosen. This may seem simplistic, but the concept of the workplace and its connection to earning money is abstract to young children. In order to make it more concrete, it’s helpful to:

• Take your child to your own job if possible, and explain the tasks you do every day – be very clear that completing these assignments is how you earn your paycheck.
• Help your child to explore different jobs; this tool from the Bureau of Labor Statistics will match careers to their interests. This will reinforce the idea that there are lots of different ways to earn money.
• If you plan to give you child an allowance for doing chores around the house, assign different payment amounts to different tasks; this will make the notion that jobs pay varying amounts of money more tangible.

Saving – Again, the idea of saving money for the future will be fuzzy to young children. The best way to encourage kids to save their money is by setting an example and allowing them to follow it. This can be accomplished by:

• Frequently taking your child to the bank where you keep your savings – be sure she’s not distracted as you deposit cash into your account
• Explain what you’re doing and why you’re doing it: saving money for the future will allow you to buy things you want and pay for emergencies that may happen

When your child is between 8 and 10, open a savings account for her and use the bank’s online tools to track her progress. This will keep her interested and illustrate the idea that savings builds over time.

Spending – Even young children are familiar with the concept of spending money, mostly because they see adults buying things all the time. When it comes to making choices about spending, you should focus on introducing young children to:

• Wants versus needs; as you shop with your child, frequently ask her if the items on your list are things your family needs to buy or that it wants to buy. Emphasize that spending on wants should be much more occasional than spending on needs. If you need more information or examples, check out this resource from PBS.
• Delaying gratification; explain that some big items, like a bike or a computer, need to be saved for. This is a good time to reinforce what savings accounts are for.
• Looking for value; again, as you shop with your children, compare prices out loud and have a conversation about the importance of watching your spending.

Giving – Instilling in your child a habit of giving is crucial at this age. Aside from providing her with a good model by charitably donating some of your money, encourage her to choose a local organization that she’d like to donate some of her money to. Explain why giving regularly is just as important as earning and saving.

Picking something nearby – like a food pantry or an animal shelter – will allow you to go to the organization’s location with your child so that she can hand over the money herself. Physically giving the money to a volunteer will cause her to feel a sense of pride, which will help ingrain a philanthropic attitude. For help finding nearby charities, consult this site.

Early Teens Ages 11­-13: Gaining Money Momentum

Once you’ve spent some time laying the groundwork of sound money habits, it’s time to ramp up the level of specificity and sophistication of your financial lessons as your children transition into their teen years. By the point, they’ll be receiving all kinds of messages about money from their friends, their teachers, and the media. It’s important that you work to solidify the financial values you want your children to have. To do, so be sure they understand the concepts discussed below.

Earning – Kids this age are still a bit too young enter the workforce, but that doesn’t mean that they can’t be earning money in other ways. For example:

• Make allowance commission-­based; in this model, kids earn a “base pay” for doing certain regular jobs around the house and pay-­per-­task for going above and beyond their normal chores.
• Babysitting younger siblings; kids in the age group are a little young to babysit the neighbors’ kids, but watching younger siblings or cousins for short periods of time might be appropriate
• Shoveling snow or doing yard work in the neighborhood; many kids in this age group are responsible enough to start doing outside tasks for neighbors. Encourage your child to print up fliers to advertise his services, and distribute them close to home.

For more creative earning ideas for kids, look over this source with your child and see what piques her interest.

Saving – This is a good age to introduce the concept of setting savings goals. Be sure to differentiate between saving for both the short and long term. For example, ask your child the following questions:

• Are there any large purchases you’d like to make in the next 6­12 months? If so, how much will you need to save each month to buy the item in the timeframe you have in mind?
• What are some of the big things you’d like to buy in the next 2­5 years? A car? College-­related expenses? Let’s talk about how much you should be saving every month to reach those goals.
• Use an app like Kids Money to help your child set savings goals and track progress towards them; this will keep him motivated to stick with saving.

Spending/Budgeting – At this age, kids are constantly tempted to spend their hard­earned money. It’s important to reinforce some of the financial lessons you taught your children when they were younger, like distinguishing wants from needs (see above) and build on those concepts by introducing new spending and budgeting ideas. For example:

• Help your child draw up a basic budget by discussing with them how much
  money they should be saving every month, then how much they’d like to spend on treats from the cafeteria, clothes, and having fun with friends.
• Encourage your child to track on his spending on his own using a money diary, and then check their figures against their banking statements.
• View overspending as a teachable moment; your child will inevitably make spending mistakes, so talk to her about her money mess ups and how it prevent them from happening again. If your child is still struggling with overpaying, point them to this resource, which will help them understand the value in seeking savings on stuff they’re likely to buy.

Giving – Now that you’ve instilled some enthusiasm for giving in your child, it’s time to make the habit more regular. After your child has chosen 2­3 charities he’d like to give to, this can be accomplished in one of two ways:

• By building a small amount of money into his budget for giving every month, or
• Setting aside a small amount of money every month in a separate savings
  account to give in one lump sum at the end of the year

Be flexible with your child about how much and how often he’d like to give – this way, being generous won’t feel like a chore. But be sure he’s following through by constantly reminding him that giving is a responsibility, not an option.

Young Adult Ages 14­-18: Putting It All Together

Once your children have reached their middle and late teen years, it’s time to put all the financial know-­how they’ve accumulated to work. Of course, you’ll also be introducing new financial concepts, but putting it all together will insure that they’ll move into adulthood with most of the skills and knowledge they need to be successful with money.

To keep moving forward with your child’s financial education while reinforcing the lessons you’ve already taught, be sure to focus on the following:

Earning – Now that your child is approaching her college years, it’s time to start narrowing down careers she’s interested in and researching the schooling required to break into each of them. To do so, consider the following:

• Have your child make a list of the different jobs she might like to pursue, then use the Occupational Outlook Handbook to see what the earning potential is like in each. Discuss with your child how much she thinks she’ll need to earn to provide a comfortable lifestyle.
• Once you’ve researched a few careers, use the College Board’s Big Future tool to find universities that offer the major your child will need pursue in order to find a job in the field she’s interested in. Be sure to take note of how much each school costs, in terms of both tuition, room and board, and other related expenses.
• Encourage your child to research scholarships and grants with the government’s Federal Student Aid site; emphasize that these types of financial assistance can significantly offset the cost of expensive schools.

Saving – Now that your child has a grasp on how and why to save, you can get a little more sophisticated with teaching him about putting money aside for the future by explaining how retirement planning and investing will make his cash grow.

• Play around with the calculator on Investor.gov; be sure to use some specific examples based on your child’s own earnings. This powerful tool will show him just how much his money can grow if he starts investing early.
• Introduce to your child the three basic types of retirement savings accounts: Roth IRA, traditional IRA, and 401(k). Discuss the pros and cons of each. Then, reiterate the importance of saving for retirement whenever you find the opportunity. Teenagers have a hard time planning for the future, so they need constant reminders.

Spending – The teen years is the perfect time to teach your children about using credit cards responsibly and avoiding debt. This is because you can monitor your teen’s spending habits and correct problems before they’re no longer under your roof. To accomplish this, be sure to:

• Carefully explain the difference between credit and debit cards; emphasize that using a credit card represents taking out a short term loan that must be repaid within a 21 day window. Otherwise, interest charges will start to pile up.
• To illustrate this point, use this calculator to type in a fictional credit card balance amount and show your child how long it will take to pay off. Hopefully, this will drive home the importance of repaying your credit card bill in full every month.
• When your child turns 18, consider co­signing a credit card for her. This way, she can learn to spend responsibly with the card while still under your watchful eye. Again, use missteps as an opportunity to provide guidance about tracking spending and the implications of getting into debt.

Giving –This is a good age to explain that not all charities are created equal. Point your child to Charity Navigator and explain how the tool works to provide information about how charities are using the funds donated to them; encourage your child to invest some time in researching a charity before forking over his hard-­earned cash.

Other Resources

In addition to the information above, there are lots of other sites on the web dedicated to making learning about money fun and informative for kids.

It’s My Life: Money
This site was created by PBS Kids to make learning about money topics easy, engaging, and relevant for children and teens. If you’re looking for budget worksheets, earning advice, or money management tips for kids, this site has plenty of resources to meet your needs.
http://pbskids.org/itsmylife/money/index.html

The Mint
This site is dedicated to teaching kids and teens about all aspects of money management through a combination of articles, tools, calculators, and interactive games. It also includes resources for parents and teachers, so no matter who you are, if you’re trying to teach kids about money, this site will have what you’re looking for.
http://www.themint.org/

Great Minds Think
This guide to financial literacy was put together by the Federal Reserve Bank of Cleveland. It’s geared towards children, so if you’re interested in a resource to let your kids explore on their own, this is just the ticket. It also includes worksheets and activities, so your child is sure to stay engaged.
http://www.clevelandfed.org/learning_center/online_activities/great_minds_think/great_minds_think.pdf

National Endowment for Financial Education (NEFE)
NEFE is a non­profit organization dedicated to providing personal financial education resources. The materials on this site are geared towards high school and college­aged kids, and are most useful if you’re planning a financial education seminar or course. However, the site also provides valuable general information about personal finance, so be sure to check it out.
http://www.nefe.org/

Finance In The Classroom (FITC)
Put together by the Utah State Board of Education and Legislature, this site provides a number of different money activities for kids of all ages. These interactive experiences teach kids everything from why we use money to how to budget and save; kids can work through these activities on their own, or teachers or parents can use them to guide learning. If you know your child learns best by doing, be sure to check out this site.
http://financeintheclassroom.org/

Financial Independence, Retire Early

This article by The Simple Dollar focuses on FIRE, which stands for Financial Independence, Retire Early. It offers the various pros and cons of investing, as well as a how-to guide to get started and the thoughts of other FIRE enthusiasts. It's a wonderful read for anyone looking at investing in real estate or hoping to retire early!

https://www.thesimpledollar.com/make-money/how-to-invest-in-real-estate-to-achieve-fire/