When 4-year-old Sky Hume prepared her tea party, she wanted to decorate the table. Money, she thought, would make the perfect embellishment. When she ran out of coins from her piggy bank, she raided Mom's wallet. Lucky for Sky, her mom had just gone to the ATM. "When I found her putting $5, $10, and $20 bills around the table, I was horrified but also laughing," says Sandra Hume.
It's not surprising that Sky didn't know what kind of greens she was playing with. Kids today aren't accustomed to seeing people pay with cash. And when we do need cash, we drive through the ATM, and poof! Bills fall into our lap. "Look at it from a kid's point of view," says Janet Bodnar, author of Raising Money Smart Kids (Kaplan Business). "You press some buttons, and money pops out of the machine."
The age of the ATM has given our children the idea that money is created on demand, so it's no surprise that they think it's limitless. But as any adult knows, there is a limit, and that's one important lesson we need to teach our kids. In fact, we've got to teach all the nuts and bolts of money early, so they'll grow up with good habits. While you obviously can't show a toddler how to balance a checkbook, even a 2-year-old can understand the basic idea that money goes in and you get something for it -- like slipping a token into a ride at Chuck E. Cheese's. Take them to the bank, fill out a deposit slip, and give the money to the teller. Withdraw some cash, and tell your child that you're saving the rest. "The more concrete you make things, the more kids will understand," says Bodnar. Some other ways to teach kids the value of a dollar:
Danielle Wallace, of Portland, Oregon, has coin jars for her 4-1/2-year-old twins and her 2-year-old. "Every time they do something special -- like help me fold the laundry or set the table -- they get a coin for their jar," she says. When the jars are full, they take their earnings to the store to pick out a toy. Make it clear to your children that they won't be paid for their basic responsibilities, like being polite or sharing.
Go through toy store ads with your child, cut out pictures of things he says he wants, and glue them on an index card. If what he wants isn't advertised, have him draw a picture of it. Then have him sort the cards in order of importance. Go through the cards every so often and see if his top pick stays the same. "Kids have a short memory," says Bodnar. So, something on the top of this list may be off the list tomorrow. "It's a fabulous lesson in delayed gratification."
Yes, it's easier without a toddler in tow, but you'd miss a great teaching opportunity. Before you go to the store, clip coupons together. At the store, discuss what you're buying and why. "If you choose not to buy something, don't say you can't afford it," says Jon Gallo, coauthor of The Financially Intelligent Parent (New American Library). "You're just choosing not to." Explain that the name-brand cereal may have a prettier box but the store brand tastes just as good.
When your child gets money for birthdays or holidays, insist that she put some in savings. Buy a special bank with a savings section, or open a passbook account at a local bank. "Don't tell them how much they have to save, but insist that they save something, even if it's just a penny out of every dollar," says Susan Beacham, CEO and cofounder of Money Savvy Generation, in Lake Bluff, Illinois, which helps parents and educators teach children to make good money choices.
Children don't understand the value of money. "If you let them choose between a nickel and a dime, they'll take the nickel because it's bigger," says Bodnar. Sort coins and bills in piles, and tell your child what everything's worth. Take the $10 bill, and show her how it's equal to ten $1 bills. Show her that $1 is equal to 4 quarters, 10 dimes, 20 nickel, or 100 pennies.
Charity helps children learn that they can gain satisfaction from money when it creates better lives for others. Hillary Landau, of Briarcliff Manor, New York, takes her 2- and 5-year-olds to the local donation box. "We go through our toys regularly, and the kids decide what they no longer use. I tell the kids that the toys are for children that don't have as much as they do." When kids make sense of dollars and cents, it's money in the bank for parents, too.
Leslie Pepper lives in Merrick, New York. She has three children.
Originally published in American Baby magazine, April 2007.
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