‘How Much Does That Cost?’: How to Teach Kids the Time Value of Money


Via LearnVest By Neale Godfrey ~

time value of moneyYou’re in your favorite store, trying on sunglasses, and you’ve finally found the perfect pair.

The glasses look great on you—they’re the perfect shape, color and size. But it’s summer, and unfortunately all the new arrivals are full price. Do you say, “I have to have them!” or think, “These glasses are just what I’m looking for, but they cost the equivalent of three full days of work—maybe they’ll go on sale soon.”

Instant gratification usually wins out with kids, and unfortunately with a lot of adults. But teaching the time value of money when they’re young gives children tools to cope with that primal urge we all experience to “buy now.”

How do you start making a connection between those trendy boots they want, and the number of weeks of their lives it would take to earn them? Let’s start by playing a game.

The “What If?” Game

This is a very simple exercise in thinking about money and its time value, and one you can play over and over with your children. Just ask the question …

  • What if you had $1,000? What would you do with it?
  • What would you do with $10,000, or even $1,000,000?
  • Which charity would you choose if you had $1 million to donate?

Have your children map out a plan for each sum. What would they save? What would they buy? How much would they give to charity? Why did they choose that particular charity?

You can even keep a record of your children’s answers in your family journal, and play the game again a year later to compare the results of how they’d spend their windfalls.

An Imaginary … Salary

Here’s another variation on the “What If” game that will teach kids about the connection between earning power and buying power: Let them figure out how long it would take to earn different amounts of money.

The ‘What If’ game will teach kids about the connection between earning power and buying power.

First, have them assume they are making $5 per hour and working 40 hours per week. Then have them assume they’re earning $10 per hour, $100 per hour, etc. At each salary, how long would it take them to earn $1,000, $10,000, $100,000, etc.? Or for a real eye opener, ask your children to figure out how long it would take them to be as wealthy as Bill Gates.

“Spending” Time: How to Teach Kids Its Value

How many times have you heard, “Mom, I would have picked my clothes up off the floor and put them in the laundry, but I just didn’t have the time?” This is the perfect opportunity to teach your children that time, like money, is a finite resource—it has to be budgeted too.

Just as there are fixed and variable expenses in a budget, the outlay of time can be fixed and variable too. A good way to illustrate these concepts to your children is to have them keep a log of everything they do and how much time they spend doing it for a few days.

Make a list of all the activities and the amount of time they spend on each one. (Your children can use their math skills to determine what percent of their total time each activity represents.) You can even split the total time they spent on each item into fixed and variable amounts. For example, hours spent at school are “fixed,” but time spent at sports practice would be considered “variable.” Another way to look at it is that fixed time is required, while variable time is “spare time.”

Sample Categories:

  • School and Homework
  • Sleeping
  • Chores
  • TV, Computer and Phone Time (instant messaging, email, social media, video games etc.)
  • Grooming and Shopping
  • Sports and Extracurriculars
  • Hanging out with friends
  • Religion/Worship

Finally, help your children decide whether they’re “spending” their free time in the best ways they could be. This activity is simple: Ask them to list their favorite activity, then calculate what percent of their total spare time they spend doing it. This will help them see ways they can make changes in how they spend the time that’s up to them—a lesson we could all stand to revisit now and then.


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