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The most effective way to teach kids about money

What is the one thing that you can do to teach kids about money that will have the most impact?

Two weeks ago, I posted about teaching kids about money by playing Monopoly. I have also written on teaching kids about money at the grocery store, and by using chores. After some feedback on Facebook, I wanted to take today’s post to look at the issue on a higher level. What can we as parents do to help our children grow in financial literacy in general terms? Games, stores, and chores are great for teaching specific skills in the moment but what about overall values concerning money management?

I believe that the most important thing we can do is to lead by example. Regardless of what the media says, parents are still the most important role models in the lives of their children. That doesn’t mean that we need to be perfect. We just need to be aware.

My in-laws rent a cottage for a week each summer and we join my husband’s family there for a week by the water. On our way there this past July, I was quizzing my children to see if they remembered their water safety rules. When I asked, “What’s the most important rule to remember about the beach?” I was hoping that they would say not to go into the water without permission. Instead, my daughter replied “Don’t feed the sea gulls.” Hmmm…. where did that come from? Apparently my reaction to the man feeding the gulls on the beach in Florida last Fall had more of an impact than my speech at the time about being careful in the water. My glares of annoyance had not gone unnoticed! Don’t get me wrong, I love birds. I just don’t think we’re helping them by feeding them chips and French fries. And, I don’t really want my towel (or my hair) covered in bird poop, thank you very much.

The point of this is that our actions speak louder than our words. We’ve all heard that before, but we don’t always remember that this applies to money management as well. Our children notice what we do in every area. They observe whether we make a list before we shop or if we decide on what to purchase as we go. They notice whether we buy everything we want right away with our credit card, or if we save up for things and then buy them when we have the cash available. My mother made a point of explaining to my sister and I that she paid off her credit card balance every month. I have never paid a cent of credit card interest. Coincidence? Probably not.

What do you do if you’re not in great financial shape yourself? Does this mean that your kids are doomed too? Not necessarily – particularly if they see you trying to dig yourself out. Watching my father pay small amounts on his credit cards every month had a huge impact on me as a teen. I calculated how long it was going to take him to pay things off and vowed to never let myself get in that kind of mess. If you’re dealing with your own financial struggle, and are not sure where to start, check out my Take this debt and SACK it series for a step by step plan on getting out of debt.

Remember that teaching our children about money is a journey and nobody is going to get it exactly right all the time. However, if we remember that little eyes are watching us, we’ll have even more incentive to make better choices. What financial behaviour would you like to focus on this week?

You might also like:

Teaching kids (even preschoolers) about money by playing Monopoly

Teaching kids about money:  Tips for the grocery store

Teaching kids about money using chores

December 3, 2012

7 responses on "The most effective way to teach kids about money"

  1. Indeed! I’m actually very open with my children about money… I remember a few years ago I had seen an episode of Dr. Phil where he made this board with pictures and explained to children where all their parents money goes (mortgage/rent, hydro, groceries, etc.). He also told them that for the $400 i-Pod they want for Christmas, their parents could buy X amount of groceries and he had a dozen bags full of groceries. It was very visual for them. I did the same with my kids last winter and they understand much better now when I say that no, we can’t afford that right now, or we’ll have to save up for it.

  2. I know this sounds cruel, but years ago a friend told me he was “not happy at all” with his teenagers not being “more money conscientious”. So he made a list of everything it takes to “run the house” for a month. He showed them all the bills – water / sewer, gas, electric, grocery, TV (cable/satellite), cellphones, clothing, fast food, all incidentals (medical, parking, and anything else). He put it all together on a list, and divided it by 30, for 30 days in an average month. Then he said “this is what it costs to wake up every day, before you even get out of bed”. Then put in the extras – entertainment, etc. That was an “eye opener” to me (I had no kids at the time). Now that I have kids, I am making them more “aware” of what it takes to run a house, and they contribute to paying for their own toys (based on the situation, of course). This helps with “why you need to turn off the lights when you’re not in that room”, and other similar items as well. To actually show them the bills, know that doing laundry after 7 pm is cheaper than doing it during the daytime, etc. Thanks for your blogs – I don’t always get to reading them right away, but when I do – I learn things too.

    • Profile photo of Leanne Seel, CPA, CA

      Thanks for the comment, Mara! That doesn’t sound cruel to me at all. At least those teens are now aware of the realities of life, as are your children. In my opinion, what would be cruel would be to send a young adult into the world to live on their own without a clue of what things actually cost. Talk about a hard life lesson! Better to learn those things in the safety of your parents’ home first before having to live them yourself for real.

  3. As much as I can, I make my kids aware of the expenses we have at home. In this manner they would know that there are other things to prioritize before Mom and Dad can get what they want.
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