Parents often make the unintentional mistake of sheltering their kids from the reality of how much the family makes and what bills need to be paid. While kids may not need to be told every detail (consider the age and maturity of the child), not telling them of the basic concept of the family's finances can be a lost learning opportunity.
Families on tight budgets can tell kids in basic terms of the "money in, money out" philosophy. You can develop a list of basic expenses to help them understand that things like rent, electricity, and even cable TV, are not free. While they should understand that their activities also cost money, avoid making them feel guilty for needing cleats for soccer, for example. At the same time, they should begin to understand that there is a cost to most things, both necessities and extras. They will begin to grasp a ballpark range of how much money is needed on an ongoing basis.
Consider these tips when talking money and family finances with your children:
- Have your kids brainstorm a personal list of family bills, and then point out ones they may not think of (water bill or trash service, for example).
- Have your kids separate necessities from extras, and explain the difference. Even young kids can distinguish the differences of having food to eat from going to rent a new movie, for example.
- Have your kids see how much it costs to go grocery shopping, and have them begin to compare food items. When they see a certain brand may cost significantly more than a store brand, for example, they may begin to understand the notion of comparison and frugal shopping.
- Ask your kids for their ideas on ways to save money. Even if your family is thriving financially, children should understand the concept of budget and necessities vs. extras.
- Help your children to develop a plan to begin saving some of their allowance (if they receive one) each week, If you haven't already done so, open them up a savings account with your local bank and have them monitor the balance. How much allowance they should receive depends on you, but a rule of thumb as to how much to save is generally 10 percent.
- Teach them the value of saving for something they want, rather than just "getting" something whenever they ask. At the same time, you'll need to let them make some financial decisions that you may consider a mistake. For example, if they buy a cheap toy that breaks after a day or two, don't "rescue" them by buying another one to compensate. The experience can serve as lessons for quality, value, and getting what you paid for.
- Provide your kids with a see-through bank so that they can see their coins and cash. It serves as visual reminder of what they have and perhaps how much they still need.
- Instill charitable giving, even if your family is struggling. The act of charity can be as simple as putting a hard-earned quarter into a donation can or buying one can of food to give to a food bank. The very act can be small, but the teaching moment can last forever.
- Don't be afraid to tell your kids you simply cannot afford something. Let your kids know that you realize that they may not always have the latest, greatest toys, video game system, clothes, or activities that other families do, and explain why. Then, offset the disappointment by doing something fun with your kids that doesn't cost a dime! They'll be so busy having fun that they won't even remember they were pining for some designer shoes only moments earlier.
