John Vaughan (Financial Advisor) @ Lucid Living
When Lori Mackey used to pull into a gas station, her children would often ask her for money so they could buy candy. Mackey, being a financial literacy expert, turned it into a math problem and a chance to learn about money.She gave each child $1 and told them to come out with as much candy as they could.
So instead of buying a candy bar, her son and daughter would buy less expensive pieces of candy, all while doing math to see how much they could buy for a buck.
Her children have learned some creative ways to spend a dollar and eventually learned how to save money for short-term and long-term goals, as well as the importance of investing and donating their money.
Mackey, who founded Prosperity4Kids.com to help kids and parents learn about money, says being creative is the best way to get children to learn about money.
When you’re young, keeping 10 cents of every dollar for a long-term goal such as college is an easy habit to get into and should lead to saving money later in life, she says. “Most kids, you give them a dollar, and they’ll go out and spend a dollar. … You really need to take these 18 years and teach them about money management and finances.”
Here are six more creative ways to teach your children about money:
Chores. This may not be the most fun way for children to earn money, but doing chores can help teach the value of a Rand. It’s more difficult to spend the Rand you worked a few hours for than to simply get it from Mom.
An allowance is the best way to teach kids about money, but only if tied to chores, Mackey said. The work could also teach them what type of work they want to do in the future. Her son discovered quickly that he prefers selling things to make money instead of doing physical labor.
Selling. For kids who have unwanted belongings to sell, JunkMail has free classifieds. What kid doesn’t have at least a cupboard full of old toys and clothes no longer in use.
Coupon clipping. Donda Combs, a financial wellness speaker whose seminar topics have included how to raise money-savvy kids, says she used to give her children the newspaper and tell them to clip the coupons of anything they recognized that the family normally purchased. If they went to the store with her and brought and used a coupon, she gave them the cash back for using the coupon.
Watch what you drink. Combs has another way to pay children for being thrifty: Pay them the menu price of a beverage when they go out to dinner and order water to drink. Amazingly, she says, they chose to drink much more water.
Waiting period. Anytime her kids, who are now 16 and 19, wanted to buy something, Combs would require a 48-hour waiting period and asked them to research and find three other items they could purchase for the exact same price. It taught them to resist impulse buying, to enjoy “window shopping,” and to make better purchasing decisions.
Shopping control. For each new season of clothes shopping, Combs created a “need” list that included how many of each item was needed and a reasonable price for each item before giving them control of the shopping. If they spent all of the money at the beginning of the season, they wouldn’t be able to “add” a new shirt or other item later for a special party. They found this difficult at first, but it helped them learn to anticipate upcoming events, she says.
“The most important thing for parents is that this is lifelong,” Mckey says of financial literacy. She recommends what’s called the “10-10-10-70 principle,” with 10% of any money a child earns being put into giving, investing, and saving for a long-term goal or for emergency needs, and 70% into saving for the short term or spending wisely.