Money: Teaching kids about money

Don't shelter your children from financial realities.

| January 2009

Money Tree

It's important to teach your kids financial responsibility and make sure they know "money does not grow on trees."

James Steidl/Fotolia

“Kids are surprisingly aware of what’s going on in the world,” says Eric Tyson, author of Personal Finance for Dummies, 5th Edition (Wiley, $21.99). “And if they don’t know that times are a little bit tough, and Mom and Dad are having to watch their spending, it’s time to tell them. Sheltering kids from financial realities does them no favors.”

A good grasp of personal finance is one of the most valuable skills a person can have, and while previous generations may have been raised with the constant admonishment that “money doesn’t grow on tree,” too many parents today neglect that lesson. Now is the time to change that, and the economic crisis we’re in provides a great incentive for doing so.

“In many ways, a long-term financial slowdown can be a blessing in disguise,” says Tyson. “It leads families to make a budget and stick to it. It forces them to be conscious about how they handle money. That’s good for kids. It shows them how the world is supposed to work.”

Here are a few helpful hints for teaching kids about finances:

Tell them the truth

Kids are perceptive. If you’ve been on edge lately, they’ve noticed. Rather than let them wonder why you’ve been working so much or constantly talking about money, explain to them, on their level, what’s going on in the family’s finance world.

Explain how much things cost

Kids might not understand that hot water costs more than cold water, or that turning up the heat results in higher power bills. This exercise will teach them how to conserve and help the family save money. You can also pile up all the bills for the month and have them look at the amount due on each one. Show them what the family’s cost of living is, and reiterate the areas where they can help reduce the costs.

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