Using the Recession to Talk to Your Kids About Money
Since I began writing about “money and kids” (Post 1, Post 2), the recession has continued to work its way through the lives of many families, ultimately shaping the perception that kids may have about money.
While the impact has been different for each family, I believe now is a great opportunity to show how the recession has affected your household. Below are a few suggestions for how to use the current state of the economy as an important learning tool. I’d also like to hear from others about methods they have found helpful – please feel free to post a comment.
Talk about your experiences. Rather than shielding them from the pain that comes with living through a recession, let them know about the decisions you’ve made to stay within the family’s budget. Whether it’s holding off on buying that new car or dining-out less, let them know that you are making some sacrifices.
How did we get in this mess anyway? Let’s face it – many of us got carried away with the high-debt lifestyle that ultimately came crashing down around us. Our kids would be well served to learn that “keeping up with the Jones’s” played a key role in the economy’s current state. Fortunately, there has been a visible shift in this dynamic where frugality is now in vogue. Will it last? Maybe, maybe not, but it’s a good opportunity to show your kids that it’s possible to be happy about saving money rather than spending it.
Help your neighbors. Even if you’re doing just fine, remember that there are many out there who really need some help. If you have the opportunity to donate to a charity or volunteer once a month, make it a family event. Sometimes the best satisfacation comes from making it a choice to give, rather than a requirement, so be sure to let your kids have a say on what you do.
Call to action. A reflection of how we got here and what we’ve done to cope is part of the learning process; now take it one step further and help them plan for the future. An approach I like for younger kids is using a divided piggy bank. Here is an example – this allows you to visualize your efforts to make sure you always allocate a portion to spend, save, invest and donate. For older children, help them setup the necessary accounts to manage their money in much the same way.
I realize that this can be a difficult time for many families, and it’s often easier to internalize your money issues rather than discuss them openly. However, involving your children in the money discussion may make them (and you) feel more comfortable about the family’s current situation and future position, as well as, giving them some important life lessons.
Lastly, I’d like to give an update on my son’s progression with money so far. He is now 3, and is beginning to have a vague understanding of what money is. The other day, he was pretending to make me ice cream. In the past, whenever he made “food”, he would just hand it over. This time, however, he made a point to ask for “some money” before he delivered the goods. At that moment, I was curious to know what else he knew about money:
Me: What do we use money for?
Him: Ummm, food… and toys.
Me: Good – and where do we get money?
Him: We get money from Dada.
So far, I’m impressed…
Me: How much money do you need for a house?
Him: uh, 6 monies
Me: ok, how about a car?
Him: 5 monies
Me: and what about this ice cream?
Him: ice cream is 16 monies
I guess I have more to teach him; however, I was not surprised to learn what he values the most.
Kevin Jaegers, Senior Investment Advisor
June 11th, 2009 at 5:41 pm
When I turned 18 my mother suggested that I take out a loan. I told her I didn’t need anything, but she said I needed good credit and establishing credit was a learning process. I took out a loan for $1,000 and put the funds into an interest bearing account. Each month I made my loan payment early, thus establishing a great payment history and then paid off the loan early and received a letter from the bank stating I’d paid off my loan “better than agreed”. The difference between the interest I earned and the interest I paid on the loan was “my cost to establish my credit”. Next I requested credit at a local store or two (this was before credit cards were in mass use) and purchased items on credit and paid them off early. This exercise helped me to understand the importance of having good credit and the importance of paying on-time to avoid finance fees and penalties.
There are many tools, available for free, to teach children and young adults how to handle money. Charles Schwab offers a course called “Managing Your Money” or MYM which has been very successful. Our local Boys and Girls club uses this package to help their members learn more about managing their own money. Another useful training tool for children is “Make More Than Your Parents”. This is a CD and workbook based course offered from VectorVest Production. Chapters include; Earning Money, Spending money, Saving money and Investing money, plus a list of investment terms and their meanings. The CD provides the student a set of tools / templates to start their own company. The book also includes a list of other books to help children determine their career path, find a job, effective teen habits, and a lot more. I received my copy of this book / CD free because I was a client of VectorVest. I contacted VectorVest and they said “unfortunately, this tool is no longer available”.
Rich in California