With more free time can come plenty of temptation to spend, spend, spend. With a little planning and creativity, you can find many affordable, day-to-day opportunities for teaching children valuable financial lessons. Consider these low-cost ways to help instill good financial sense:
• Bank on savings – When children ask for money or a new toy, use it as a teachable moment and suggest they begin saving to pay for things they may want in the future.
Reinforce this message to help kids understand their options with money, including saving, spending, investing and the often overlooked – giving.
Set a realistic goal, and when they reach it, take them to the bank or credit union to open a savings account, another opportunity to educate them on how banks work.
• Count coins – Daily transactions are chances to increase children’s money smarts. Show younger children how to identify and sort coins at home and ask them to count money and pay for small cash purchases as they learn to add and subtract.
Collect spare change for a few weeks and have children count the coins to come up with a total. Or try a craft project that teaches them about managing money: Have each child label and decorate four jars with “spend,” “save,” “invest” and “give” and then talk about how they can allocate coins for each category.
• Explain your expenses – When you pay bills, plan some teaching time to explain the costs of things children may take for granted, such as your car, cell phone plan, electricity, Internet and TV service.
Use play money or even real cash to demonstrate how much of your total budget is used for different expenses.
If you are comfortable sharing specifics, have older children calculate the total and compare it to your monthly budget to help them understand the importance of staying on track.
• Inspire entrepreneurship – Earning is learning. Even young children can earn money for doing extra chores or yard work at home, and they will learn valuable lessons by working with people outside the family.
With your support and encouragement, young people can see what it’s like to be their own bosses and have fun in the process with business opportunities from running the classic lemonade stand to helping neighbors with pet sitting or errands.
Being paid for their work teaches kids about managing time and money, paying expenses and taking care of customers. When they are old enough for a work permit and their first part-time job, you can help them understand their paycheck and encourage them to set aside money for the future.
• Practice money management – There is no substitute for experience when it comes to handling money. Give children a chance to do so by allocating a weekly allowance and giving them the freedom to manage it on their own.
Provide clear direction on what they should spend versus save and be firm about staying within budget. If they ask for more before the next allowance is paid, use it as another teaching moment.
When they reach the teenage years and begin earning their own money, open a checking account and teach them how to manage their transactions through a bank.
• Pursue low-cost fun – Assign older children to come up with budget-conscious summer activities for the family to enjoy, from water fights at home to picnics at the beach.
Look online for free family events and coupons or discounts for museums and water parks, and matinee prices for movies. Enjoy the free learning opportunities available through summer programs and events at your local library.
• Shop smart – Teaching children to be smart shoppers will help them understand their spending decisions and live within their means throughout life.
Fortunately, there are many day-to-day decisions that illustrate important concepts such as finding good value for money, whether it’s sticking to your list and comparing costs at the grocery store or researching a major purchase to find the best product at the best price.
Summer free time can be fun and productive when you think creatively and take advantage of daily opportunities to teach your children about money. PD
Don DeJonge is a financial adviser with Northwestern Mutual. Northwestern Mutual is the marketing name for the sales and distribution arm of The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, its affiliates and subsidiaries. For more information, visit his website .
Don DeJonge
Financial Adviser
Northwestern Mutual
