Contributions by Molly Herndon and Carolyn Bird
One of the most important things a parent can instill in their child is a sense of financial responsibility, but talking to children about money is often not a priority for parents. Parents who model smart financial behavior teach even very young children how to make decisions that align with their values and goals. A very basic message parents can share with children is that financial decision-making is about making choices. Parents who are intentional about children how to make choices among many options have a better chance at being successful in helping their children develop the practice of active decision-making. The best news is a little effort can have a big payoff, as these lessons are likely to be carried into adulthood. Here, in the final installment in the November-long “Steps to Financial Freedom” series we offer tips PFMs can suggest to families to teach their children to be savvy consumers.
Look for Teachable Moments
A family’s day is made up hundreds of opportunities to talk about money. Whether your client’s family is shopping, watching television commercials, running errands, paying bills, or buying gas, each consumer exchange presents a chance to teach valuable lessons. Encourage clients to take the time to engage their child in the process by explaining what’s happening, asking questions, and answering their child’s questions. A teachable moment can be as simple as letting the child know that if they spend all their money at the fast food restaurant, then there won’t be enough money to buy the action figure when you go to the store later that day or week. It won’t take long for the child to understand that once the money is spent that other items cannot be purchased. Soon, the child will begin to prioritize what is important to them without parental coaching.
Parents don’t have to go it alone. The program Thrive by 5 is designed to teach preschoolers about saving and spending. Here is a list of 17 things that 5 year-olds should know about money. Involving your older children in your decision process can provide valuable lessons. Encourage your clients to help older children learn to be savvy decision-makers by helping their parents identify sales and better prices. Soliciting children’s observations about banking and credit processes gives parents an opportunity to gauge the child’s understanding, correct misperceptions, and to reinforce valid observations. However, the most valuable moments are the observations children make are those of their parent’s financial management practices. So, a great place to start in teaching financially savvy children is to support clients in striving to be a financially responsible role model.
Use Current Events
Some parents may avoid topical conversations about the economy and finances in front of their children out of a fear of making their children anxious. PFMs, you can teach your clients that talking about the economy may actually decrease children’s anxieties. Tell clients they don’t have to shy away from discussing the current state of the economy; just find a way to reach the child on their level. The NYU Child Study Center has some suggestions on how to approach the topic of the economic downturn, by a child’s developmental stage.
It is important to talk to children if a friend or relative has lost a job. Tell clients to explain why this happens and talk about any anxiety the economy may be causing for their children. Specific to military families, openly discussing how deployment impacts a family’s finances can relieve children’s fears. Prompt clients to talk about changes to a family’s finances and the adjustments that will need to be made.
America Saves has a Military Youth Saves program in which kids can take a pledge to save, get tips for saving, and parents can read suggestions for smart saving strategies. We will highlight the Military Saves campaign in a future posting, when the campaign gets up and rolling in the early part of 2012.
Families should look for ways to save and budget together so that children can learn by contributing to the development of a healthy spending plan. Tell clients to ask children to come up with new ways to save money in the house. For example, parents can ask children to determine which pizza coupon offers the better deal.
Some families might decide to give children allowances in exchange for chores; suggest clients assign a monetary value to certain tasks in the home so that even very young children may begin to understand the consumer process. Parents should also be encouraged to help their child manage their money by supporting their saving for goals, which teaches the lesson of being rewarded for saving.
Making savings and smart financial decision making a part of the daily family conversation is an excellent way for parents to encourage this responsible behavior.
What strategies for teaching children about smart spending have you heard about? What works well? What doesn’t work so well?