Money Management Skills for Children

As parents, one of our responsibilities is to teach money management skills. Even very young children can count pennies and exchange them for “purchases" as Beth Kobliner points out. Older children can walk to the store with a 10 dollar bill, buy some milk and bread, count the change, and bring home the receipt. They are helping the family and learning about money. As Beth points out, using cash is better for kids than debit cards. Cash is concrete and finite. Young children actually believe that ATMs print money and that the flow is unlimited. They do not realize that money represents their parents’ long hours and hard work. Like Beth, I like using cash for young children but my rationale is that they are in Piaget’s stage of concrete operations and understand tangibles better than abstractions.

When I was in third grade, the Bank of America came to our classroom and gave each child the opportunity to open a bank account. For one dollar, they gave each of us our own small passbook and an account number. They showed us how they entered, stamped, and dated each deposit. Then, the bank representative returned weekly and allowed us to make additional regular deposits. This was a great math lesson and personally, I loved seeing my balance grow!

When I was 10-years-old, my accountant father would give me a quarter and let me walk to the store to buy a comic book and a candy bar. The comic book cost 12 cents and the candy bar 10 cents for a total of 22 cents. When I returned home, he would make me count the change and return it. At the time, I thought he was overly strict but he forced me to learn money management skills that have lasted a life time.

By high school, every teenager can have a part time job, earn their own money, and open a bank account. It is interesting how teens spending habits change when it is their own money rather than their parents. They also take better care of the clothes and other items they buy on their own. Having a good part time job is also good for learning time management skills, developing confidence, learning about the world of work, and building a resume.

Some high schools offer economics or consumer math courses. In one class, students are given a monthly income, like $2000, and told to make a budget including housing, clothing, food, recreation, savings, and other necessities. Highs school consumer math courses can teach about income tax, property tax, compound interest. One student project compared the list price of an automobile to the actual price paid after four years of interest. An eye opening project!

Credit cards are the worst. Some of the worst exploitation of young people I have seen has been by the credit card companies. When I was teaching college, the credit card companies came on campus and offered students free phones for opening an account. The students obviously wanted the phones and started recklessly using the credit cards without keep track of their expenditures. Very soon they had debt that exceeded their ability to repay it and were paying interest on interest. Even worse, the parents of one student bullied her into getting a card and bought a large screen TV on her account. They ruined her credit history and got her into debt.

Even adult children occasionally need help with money. Beth suggests avoiding loaning adult children money. She says there are many things to consider. First, they may not pay it back. If this happens, it becomes a gift and other children will expect the same. If you do decide to loan your grown children money, make sure you have a clear written agreement that is signed and dated which includes the amount and repayment terms.

Children can and should learn money management skills. They can start developing good habits at an early age. For more excellent tips I direct to Beth Kobliner’s site: www.BethKobliner.com.