Now that the kiddos are back in school, what will they learn about money? The best I can tell from my 1st grader is that he will learn about counting money this year. He will certainly need to know how to count it though much less so in these days of plastic and digital money. Times have changed. It will be more likely that he needs to understand money concepts and how money moves in the world of virtual finance. This is much more than when I learned to hand over 25 cents for candy bar. Given common core and testing requirements it is unlikely the schools can add more to their already full plate.
How can we help our kids? Keep in mind that all that our kids observe all we do. They take this in both consciously and subconsciously. Our use of money, talk of money (or lack of discussion), sends messages to our little ones that make an impression lasting a lifetime.
Here are some ABCs to help you with your child’s financial literacy.
Using cash helps our kids learn the use of money, counting skills, and prioritizing spending. Though challenging for parent and child, it is a good lesson to go the store without enough money to buy the desired toy. This can present the concepts of saving, delayed gratification, and prioritized spending. Kids get to see how money flows with real coins and bills in ways that later can apply use in the digital financial world. Later parents can transition to a digital allowance on a debit card to begin learning the world of digital money.
Bank (the Piggy Type)
Use of a piggy bank gives kids a visual of how money grows when put away for safe keeping. This helps learning to save money for future expenses. I use a divided bank (Savvy Piggy Bank) to divide my sons allowance and other moneys into various uses. These uses include college money, other savings, charity, and “toy” money. I help my son divide his allowance into the categories. This division sets up my child for understanding in future employment that not all money earned goes into the pocket. Perhaps most important, it begins an appreciation and practice of paying one’s self first for savings and investing.
Child savings accounts (UGMA/UTMA)
Uniformed Gift to Minor’s Act/ Uniformed Transfer to Minor’s Act (UGMA/UTMA) accounts are a category of financial accounts under a child’s social security number. These can be an account at a bank or brokerage account. An adult must be a trustee on the account. Typically a parent is the trustee. As an adult, the trustee is legally responsible for what happens with the account. The accounts automatically transfer to the minor when they become adult. As UGMA/UTMA accounts are legally the child’s assets, they will count more in the current Federal Financial Aid formula.
A parent, using this type of account, can give the kid experience using a bank with the child’s own account. Later the child can learn to invest in mutual funds with a low cost firm such as Vanguard (Vanguard.com).
Our children often learn from talking with us. In the same way, they can learn about money. There can be fear around the unknowns of money. Understanding about money can begin to help allay the fears. This can be simple such as explaining about a credit card or the purpose of a check. Perhaps even just mentioning to the child what you are doing when you are paying the bills. Growing up, I’d see my Mom periodically sit down at the kitchen table with a pile of bills and the checkbook to pay the reoccurring bills. While many of us do this by computer today, the concept is the same. Without being specific, it is easy to let the child know what is going on with the work Mommy or Daddy is doing on the computer.
In my discussions, I need to consider how I talk about money. For example, do I speak from a place of scarcity or abundance? Do I spend somewhat impulsively or with great deliberation? Do I spout off about stock market wins and avoid talking about market losses? Any extreme is probably not healthy. As I am learning to talk about money with my son, I find that I am learning more about how I handle and think about money.
Helping at store checkout
Many stores today have self-checkout lanes. I have my son become part of the checkout process-pushing the screen buttons, entering the codes for produce and more. He now remembers, most of the time, that bananas are produce code 4011.
It is easy to let my kid practice spending. He can use his allowance, if he remembers to bring it, at the store to buy the important new toy of the day. This gives him practice at remembering his money, having enough money for the purchase, making the purchase and checking his change from the cashier. When I do this I try to use a clerk to checkout rather than a self-checkout so that he has some person-to person contact in process.
An extension of spending practice is with the use of school lunch money. This unsupervised practice gives my son a safe and independent way to spend. These purchases can be cash or using the lunch debit card the school offers. This gives him practice in purchasing items and making choices. With the use of cash, he is responsible to not lose the money and to make sure he receives the proper change.
It is ok to say “I don’t know” when you truly don’t know the answer to your child’s money question. You can take time to research together or independently (child age depending). This models that it is “OK” to not know the answer and how to find an answer to an unknown. This opens the door to follow-up and continue the conversation about money with your child after looking up the answer.
The President’s Advisory Council on Financial Capability was formed to help increase America’s financial literacy. They put together an age oriented interactive website to help parents and educators with financial literacy activities and more.