Children And Financial Literacy

I have a teacher friend who did me the favour of asking some questions of her Grade 3-4 students… The responses provide some wisdom for us all:

Q1: “When do you know you’re rich?”

From one: “When you have fancy houses, fancy clothes and a fancy car.”

From another “I consider $50 rich because it’s more than $10 or $20.”

Q2: “If you had $100,000, what would you do with it?”

From one: “An i-pod, a laptop, house decorations and my two favourite books ‘Amelia Rules’ and ‘Rainbow Magic.”

From another: “Most of it I would donate to poor people who don’t have food or shelter.”

Q3: “What are the best things money can’t buy?”

From one: “Money can’t buy your family or your love, but most of all it can’t buy you.”

From another: “Friends and family because they don’t have price tags on them.”

I had the opportunity to teach a Financial Literacy” class to grades 7-8 that provided me additional insights.  You’ll never guess how they answered the question “Can someone have TOO MUCH money?”  The class quickly agreed that yes, with too much money you wouldn’t know who your friends are, you wouldn’t be able to trust anyone, and being able to buy whatever you want isn’t really very healthy.  What??  Is this really the entitlement generation of greedy ungrateful kids, or has the press misled us in having us believe this next generation blindly wants for everything and has their noses on screens all the time?

Kids are far more insightful than they’re typically given credit for by the older generations.  Let me give them their dues.  Being somewhat media-bound means they’re also media-savvy.  They are also smart shoppers and know a deal when they see it, partly because they have more money than the generations before them had.  And don’t get me started on how their brain neurons are connecting like no generation before them, thanks to the technological complexity they are exposed to early on.

That’s why I’m a big fan of starting kids out on an allowance as early in life as possible.  As Barbara Coloroso says, “The best time to start giving your children money is when they will no longer eat it.”  When you give your child their weekly allowance, encourage them to split it up into 3 jars or envelopes which together you can design and label:  ‘Give’, ‘Save’ and ‘Spend’ (and have them think about money IN THIS ORDER).

I believe it is important for children to ‘experience’ each of these categories, and to start by allocating allowance money to each of these categories each and every week.

Make giving a personal experience.  Have your child decide what charity or cause they want to give to. It could be as simple as giving a coffee to a homeless person, donating food to the Food bank, or donating money to a charity, church or foundation they feel strongly about.  Let them decide how much to give. The amount doesn’t matter as long as your child is learning what their gift of money can do for others, and they will benefit from an experience that will nurture a generous character (of time, talents and resources) over time.

Make saving for the future automatic.  It is a good idea for children to save, just as adults do – and the sooner the better.  Saving part of one’s income is a wonderful habit to form in the formative years.  The power of compound interest truly is the 8th Wonder of the World and the earlier children are able to automatically save some of their money towards the indefinite future the better off they will be as adults when it is harder to start this money-savvy habit.

Allow your children to spend the rest!  There are many important lessons to be learned when it comes to spending, and typically a child must experience them to learn from them.  Understanding trade-offs between price, value and quality are best taught in the grocery store.  Talk to your children about the decisions you are making with your money when you shop.  Then let them take personal accountability for their shopping decisions, and remember mistakes are OK.  In fact, when they make a mistake, don’t jump in and solve it for them – better they learn from a mistake early on with $10 (and realize Mom or Dad won’t always save them), than expect a bail-out when they make a $10,000 mistake later in life.

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