I love money. Before you quote the Bible to me, allow me to explain. I studied finance in college. There I learned all of the ways that money can be multiplied through investing. I specifically focused on capital markets and arbitrage. While in college I had a summer internship at a major investment bank. After college I went on to be a mutual fund data analyst then worked at various brokerages until I decided it wasn’t for me. I know. I could have made millions trading the market but instead I opted to follow where I felt called, healthcare.
Let me bring this back around for you. I love what you can do with money. But first I had to learn about money. I was blessed to attend a high school where I had a class that taught us how to deal with money. We learned about the stock market, how to balance a check book, how to create a budget, etc. That was rarely unheard of 20+ years ago when I was high school and I believe it’s probably non-existent now. Furthermore, I grew up in a house where my parents taught me about money. I had to earn it and budget it. When I was high school my Dad made me a co-signer on his checking account to help teach me financial responsibility. #MindBlown. Yet, millions of people are entering adulthood lacking this basic knowledge.
If you are struggling with how to teach your children the basics of finance when you may not even understand them yourself, the New Black Chick is at your service. There are several posts on this site that talk about everything from making a budget to deciding on life insurance. How do you distill that information for children? And how young should you start?
My recommendation is start teaching children about money as soon as they have a concept of wanting things and that things cost money. Meaning, the first time they ask you for something and they realize it takes money to buy it, that’s when you can start to have those conversations. Believe me, saying things like “money doesn’t grow on trees” doesn’t mean much. I’m sure they know that, like I knew that. What I didn’t get from that statement is how to get money to buy what I want. I was too young to have a job.
I’ve had the opportunity to teach junior high and high school students about money through volunteer opportunities. There is a particular order in which I teach kids about money.
- Money Basics: Explain what money is and isn’t. In today’s world of e-payment and Bitcoin, this concept can be a bit confusing for them. Money is what we have agreed to use to buy stuff. Money can take many forms credit cards, checks, Bitcoin, etc. But the value of money doesn’t multiply through the use of various vehicles. Meaning, just because you have checks in the checkbook doesn’t mean you have money in the bank.
- How to get money: People do something in exchange for money. This could be having a job, starting a company or investing. I encourage you not to say “you work and you get paid”. That could unintentionally lead them to thinking they must have a job when they really have an entrepreneurial spirit. The gist is you provide a good, or service or labor in exchange for payment.
- How to care for money: The book the Secrets of the Millionaire Mind by T. Harv Eker explains this very well. His book goes beyond budgeting. He has a six jar system. Money is to be divided into the jars play, long term savings for spending, give, financial freedom, education and necessities. This is done to appropriately bucket money where it belongs and also to tell the Universe you know how to take care of the money you receive. Not only did I do it and decorate the jars, I also opened up six bank accounts and automatically divide up the money every payday. Every so often I take the money from the jars which is mostly coins and put it into the bank. I just like having a physical representation of my goals so I can see it every day.
- How to spend money: This is all about delayed gratification. Before buying anything, yes, anything really think about the purchase. How expensive something is will dictate how much thinking you do. Don’t spend 20 minutes thinking about which brand of detergent to buy, but think about the value versus the cost. If it’s a car, take time to do the research and get what you want within reason. Also, this is a great time to teach them how to write a check, how credit cards work, and that PayPal isn’t endless amounts of money.
- How to give money: Money lent is money lost most times. If someone asks you to loan them money, think about the amount you can afford to lose and gift them that. As for charities, pick the ones that have the most meaning to you and give to those. You can’t donate to every charity.
With children up to about twelve this is where I stop. That’s a lot to absorb for them. This is great time to start putting everything into practice. We are seeing some very young entrepreneurs these days such as Maya Penn and Asia Newson. When they get to be teenagers it’s time to add in topics about paying bills, investing, time value of money, borrowing money and credit score. Soon many of these kids will be adults on their own and maybe away at college. Credit card companies love to prey on college students as they tend to not understand the basics.
Also in the teenage years is where I explain money doesn’t equal wealth. Wealth is the difference between what you earn and what you owe. Wealth is built through assets, richness is built through money.
Here are some great resources to help you get started with your children. You can start as young as eight years old or whenever your children start recognizing that money is a thing that can get them what they want.
- Mint.com is a great financial education site in general, check out The Ultimate Resources for Teaching Kids About Money
- The book Think and Grow Rich by Napoleon Hill is good for preteens on up
- Rich Dad, Poor Dad by Robert Kiyosaki is a classic and has a wealth of resources
- Junior Achievement USA is my personal favorite, their motto is “turning kids of today into entrepreneurs of tomorrow”, find your local chapter
All of these resources along with information found right here at the New Black Chick can take you beyond the statement “money doesn’t grow on trees” to teaching them how to create financial freedom, be generous and financially savvy.
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