Yo, Where's My Cheddah
In case you didn’t know, April 12th is “Teach your Kids to Save” Day. Conveniently, right before Tax Day. Personally, I had no idea there existed such a day of recognition, but I love this idea. I mean, have you ever really talked to your kids about money? It’s a funny talk. I recently asked my 2nd grade daughter where she thought our money came from. “Your wallet,” she responded.
We should be introducing our kids to the lessons of saving money, incurring debt and frivolous spending as early as possible so they can begin to develop strong financial habits. Ironically, one study showed that by the time a child is 7 years old, he or she has formed beliefs about money. Seven. Years. Old.
So guys, why is there no “financial management” type class embedded in the everyday curriculum of most schools? We teach kids about puberty and sex, so why don’t we teach them about money? Students are encouraged to study hard in order to get high grades so that they can go to the best college and get a good job. But how are they supposed to manage their income after they earn it if no one ever teaches them?
Couple this with college debt. According to CNBC, approximately 70% of college students graduate with student loan debt. The average debt that a 21-year-old leaves school with is approximately $40,000.00. That’s pretty detrimental to a newbie trying to make it in the real world.
But it happens to most all kids. So many high school students, who under the government’s eyes are not mature enough to vote, are presented with the option of either a) amassing a huge amount of debt in order to attend college or b) not go to college. With absolutely no understanding of the impact that the debt will put them in when they graduate, most kids don’t even consider option b.
This happened to me.
I wasn’t even 18, not even legally independent, when I was asked if I wanted to assume tens of thousands of dollars in debt in order to attend the college I preferred (fire it up UVM!) or go to a local community college. Of course I went with the first choice. “I have no idea what any of that means or the consequences it will bring, but, yes, let’s do it,” said 17-year-old me. The best part is that after assuming this massive financial obligation, I decided to go to law school. Rinse, repeat and intensify the debt blanket that was covering me.
Would I have chosen differently if I knew the elephant sized bills that I would receive 6 months after graduation? I can’t honestly answer this question, but I do wish that I knew better how to forecast and manage the debt.
Since there are no classes about money management in most schools, it is left for parents to teach to kids. A fun subject, second only to talking to kids about the birds and the bees. We definitely need to help our little ones navigate their beliefs and practices around money so they develop strong financial management habits.
Here’s a few tips to help:
1. Set an example.
Little eyes are always watching. If you are throwing down plastic everywhere or fighting with your spouse about money, your kids are taking it all in. I have recently started taking out cash to pay for everything. Yes, it requires the annoying trip to the ATM, but my kids don’t see me paying with a credit card, thereby sending the message that “buy now, pay later” is okay. My husband and I are constantly revisiting our budget as well. We don’t fight about it, but we do discuss our finances openly in front of our kids.
2. Teach them to budget.
If in a store, they want to buy something, tell them, “If you buy this toy now, you won’t have enough money to but the game later.” They should know that stuff costs money and money isn’t infinite. Most elementary and middle school kids should understand the potential outcomes and consequences of their choices.
3. Give Commissions, not Allowances.
David Ramsey, New York best selling author on this topic, suggests that giving kids allowances basically provides them with money for breathing.  Giving them a “commission” based on the job they performed let’s them in on a huge secret: money is tied to work. Meaning, you have to work to make money. He so artfully states: Allowance is welfare. Commission is work, get paid; don’t work, don’t get paid. 
4. Talk about your spending decisions.
If you are grocery shopping, you could highlight “The reason I chose the generic Rice Krispies is because it costs 75 cents less than the name brand. Plus, it all tastes the same, junior.” (Exception to this rule: Ketchup. Stick with Heinz; the other stuff doesn’t taste the same and I am not getting paid to say that.) On this same grocery trip, you could also give your child $2 and have her make choices about what fruit to buy, within the parameters of what you need, to give them the experience of making choices with money.
5. As your kids get a little older you could teach them about compound interest.
I personally love compound interest. Use specific numbers and examples. For instance, if at the age of 14 you save $100 in an interest-bearing account, by the time you are 65 you will have $23,000 vs. if you do the same but only at the age of 35, you’ll only have $7,000.00 at the age of 65. There are tools like investor.gov that helps kids clearly see how their money can grow.
There are countless resources out there with poignant examples of how to captain your kids’ education and beliefs around money. I am certainly not an expert on the “how tos” but I do know that if you don’t teach your kids about money, they will learn it from someone else. That someone else could be the credit card company. And they are only looking for your cheddah.
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