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Balancing your own budget can be tricky enough, but making it all make sense to our kids can be another challenge. Before their very first allowance or paycheck, kids know what money is - but it’s often up to us that they fully understand it.
Many parents and educators don’t know where to begin. Students aren’t learning financial literacy in schools as much as they should, so the responsibility often falls onto and relies on dinner table conversations. How do we tell an elementary student the value of investing early? If they don’t have a job yet, do they need to understand a paycheck?
Research shows that financial habits are formed by age 7 - and financial literacy is just that: a habit. Personal finance isn’t a skill like addition or multiplication, it’s a learned behavior that takes time to develop. Which is why at FitMoney we’re committed to not only educating students as early as kindergarten about the value of money and what it means to take control of it, but empower parents with the skills they need to model, explain, and be reliable advocates for their own children's’ financial wellbeing.
Don’t know where to start? That’s normal, but with these tips you can begin an environment of open financial conversation that promotes curiosity into building financially fit futures.
EXPLAIN THE DIFFERENCES BETWEEN NEEDS AND WANTS, GOODS AND SERVICES
Knowing the differences between what we need versus what we want is a great first financial lesson. When it comes to budgeting, we have to allocate our first available income to what we need: shelter, food, utilities, medicine, etc.
From an early age, kids will understand this, too. Which is more important: vitamins or a new toy? A blanket for the winter or candy at the movies?
It doesn’t have to be an either/or situation, but it’s important to start viewing what we receive and spend on as priorities or not. You can start by having them find items around the house to sort as needs or wants, asking if you need or want something at the grocery store, and sharing your own needs or wants. You need to pay for shelter, and once that is paid for, then we can buy movie tickets.
Another great difference is goods versus services. For example, the ingredients for dinner are goods, but their haircut today was a service. This helps introduce how other people earn money and how each dollar moves it’s way from person to person.
SHARE YOUR OWN SAVINGS GOALS AND HOW YOU WORK TOWARDS THEM
Now that they know how we make spending decisions on needs and wants, it’s also important to introduce why we save money. If the basement floods or you have a surprise doctor's visit after soccer practice, savings can be another need.
Think of personal and recent examples of when having savings could have or did help. Ask them what they remember, too. Recognizing that savings are a need when it comes to all of life’s surprises is a first step, but sharing how you save is another.
Ask what they want to save up for - a new toy? Money to start a lemonade stand? Start by putting a few dollars away in a jar or piggy bank to watch the money grow. Be sure to set a goal so it feels attainable and the pride they can feel when they take the time and practice patience into building financial strength.
POINT OUT ADVERTISEMENTS AND HOW THEY INFLUENCE YOUR OWN SPENDING
Advertising and marketing change a lot of our spending habits. Kids are more exposed to ads and promotions than we may realize.
Next time they ask for something, ask them where they heard of it. It’ll likely be from an ad they saw. Start pointing out together different kinds of advertisements: billboards, coupons, magazines, TV, radio, social media, YouTube, and more.
Seeing an ad can be tempting, but once they know they are trying to change the way we spend, we can share that they shouldn’t influence how we spend. Our budget is still the same, but we can pivot what we’re saving for.
TRY AN ACTIVITY AT HOME
FitMoney’s Community Connection Guides in our K12 financial literacy curriculum are full of activities you can play right at home. The vending machine activity below can help put into perspective how much things cost.
FitMoney’s Vending Machine At-Home Challenge
Create your own vending machine or store with items in your house. Decide how much each item costs, make labels or price tags if you like, and then practice different ways of adding up paper money and coins to “purchase” the items.
In a real store, try to guess how much items cost before looking at their price tags. See if you can put them in order from least to most expensive. Then check to see if you were right, and discuss any surprises.
There’s no one right way to begin teaching the value of money - only the right time. And that time should be today. The earlier we begin teaching, introducing, and practicing healthy financial skills, the more promising of a financially fit future we can build for everyone.
FitMoney is a non-profit organization that advocates for financial literacy education starting in kindergarten by developing non-biased, free curriculum for educators and activities for students and families to empower financially fit futures for all.