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By Beverly Stewart, M.Ed.

Is your child’s weekly allowance money burning a hole in his pocket? Perhaps it’s time to have “the talk” – the money talk, that is!

Even the youngest children will benefit from an age-appropriate discussion about earning and managing money. Of course, this is an ongoing conversation. And, the key is to tailor the lesson to the age of the child, moving on to more complex money issues as the child matures.

Not only is learning about money a crucial life skill, it’s also a relevant way to expand math skills!

Monopoly money

Understanding exactly what money is (and where it comes from) is the first step. The following conversation actually occurred between a business associate of mine and her daughter, when the child was about six years old:

Mom: “I’m sorry honey, we don’t have the money for that today.”

Daughter: “Why don’t you just go to the money store and get some more?”

Once she was done chuckling over her daughter’s description of the local bank, this working mom had to think quickly. Did her daughter truly not understand where money comes from? Or how you earn it?

The fact is, although it seems intuitive, most very small children have no real idea of how money is earned. Offering an allowance for weekly chores is one easy way to instantly explain the concept (and get the trash to the curb each Tuesday!).

Educator’s Note: This is a perfect opportunity to teach coin and bill recognition and values, counting money, and even the lost art of making change. Counting money of one denomination requires basic math skills learned in primary grades, and then being able to add different coins and bills together comes next.

But, I need it, mom!

Of course, once the piggy bank begins to fill up, your child is ready for the next lesson: Need versus Want. We need to pay the mortgage. We want to go to the movies. This lesson often takes quite some time to get across.

For older children, budgeting in order to afford some of those “wants” is a timely lesson which coincides with the covetous phase so prevalent during the pre-teen and teen years. Creating a list of expenses (insurance premiums, car payments, utility bills) and comparing it against household income is a real eye opener for most kids. Who knew that the cable bill was so high or that cell phone services cost that much?  And that dreaded oil bill! Sometimes it’s a wake-up call for parents, too!

Educator’s Note: Learning to create a proper budget uses critical math skills such as the ability to compute using fractions, decimals, and percents, the difference between positive and negative integers, and timelines. It also answers the age-old question, “But when will we use math in real life?”

Future Shock

A classic quote comes from the hit show Friends. Upon opening her first paycheck, a bewildered Rachel wails, “Who’s FICA? And why does he get all my money?”

Many teens with part-time jobs may have the same reaction without a little advance preparation. Today’s teens have significantly more disposable income than in previous years and they should become intimately acquainted with the financial concepts of saving and goal-setting.

The object of your teen’s desire – new boots, concert tickets, a car – can all be achieved with regular deposits to a “Wish Fund.” Savvy parents may want to contribute as well, in order to encourage saving.

Teens will also need to learn the difference between a scholarship, a grant and a student loan, the impact of a high/low credit score, and the beauty of compound interest.

Educator’s Note: Creating amortization schedules, learning to reconcile a bank statement, and even crafting income projections are all exceptional business skills. Learning to complete these tasks may even spark an interest in a career in accounting or business management!

By teaching children from a young age onward about money management, they will be better prepared for a lifetime of financial success. So, sharpen those #2 pencils…

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