In conjunction with our December, Kids Money SavVy topic, the following is an interview with Money SavVy CEO, Susan Beacham, written by blogger, Erica Gellerman amd originally posted on The Every Mom Website. Their topic is What You Need to Know in Talking to Your Children About Money.
Start the conversation early.
According to Beacham, we should start talking to kids about money earlier than we think, and it’s not a one-time conversation. We need to constantly be modeling the behavior that we want them to adopt.
It’s not enough to talk to kids about making smart spending choices and saving money for big purchases — we have to actually do that ourselves because they are constantly watching our every move and will reflect the behaviors we show them. No pressure.
Beacham suggests starting the conversation and activities early but in an age-appropriate way. Money is an abstract concept, and it’s our job to make it concrete.
For example, when we’re grocery shopping and deciding between two products, don’t keep the decision-making process in your head. Give your child a window into the choices you’re making by saying,”This brand is great, but it’s $0.10 more expensive. Should we buy the cheaper brand and try it?” Beacham says by doing this you’re helping your child understand the tradeoffs that you’re making with money on a daily basis.
Help them understand goals.
Because money is such an abstract concept, it’s your job to provide concrete ways for your kids to understand money. Beacham suggests a goal-setting activity to help with this. You can do this activity with your kids even before they are in kindergarten. As soon as they understand that we use money to pay for things, they are able to grasp this activity.
Give your child a piece of paper and have them draw something that they’ll save to buy one year from today. If they are younger, help them understand the concept of time by asking them questions like what grade will they be in next year and how old will they be.
Once they’ve drawn the picture of what they’ll save for, put it up on your refrigerator so they can have a constant reminder. And remember what Beacham advised about modeling the behavior you want your child to adopt? The perfect way to do that is by doing this activity yourself.
Adopt a conditional allowance.
When I was a kid, my parents tried to teach me money lessons through an allowance, but the exercise never really stuck. Because of that, I’ve been a little unenthused about the idea of establishing an allowance.
But Beacham broke down how to create a conditional allowance that actually works and is relatively easy to implement. She advises starting your child on an allowance around age eight. At this age, they’ve probably realized that there are certain things in life you are paying for and you’ve seen a pattern of what they are constantly asking for.
For example, if your child loves reading new books and is asking for a new book every time you go shopping, keep a tally of how much you spend on books for them. Let them know that this is an expense that they’ll now take over and manage themselves.
If they usually ask for $25 worth of books each month, you’ll give them $25 to buy their books. Once the money is gone, it’s gone. Then help them understand the choices in their spending behaviors.
They can continue to use the entire allowance to buy books they’re excited about, or they can go to the library and borrow some books for free. If they borrow books, they can save more of that allowance toward the goal that they’ve set. Beacham advises making this lesson concrete by using an allowance contract.
To learn more about how to talk to your children about money, we would like to invite you and your children and/or grandchildren (ages 4 to 10) as our guests to our GCW Capital Group Money SavVy Holiday Party, December 27 from 10 am-2 pm. at Platters Chocolate Factory 908 Niagara Falls Blvd, North Tonawanda, NY 14120.
To make reservations call 716.256.1682, or email info@gcwcapital with the names of all attending the ages of the youngsters.