Teaching kids about money is not easy nowadays. Despite the recession to end all recessions, many still don’t understand the value of a dollar. The age-old adage “money doesn’t grow on trees” doesn’t seem to compute, especially when it pertains to buying that new outfit or game.
But, as the song goes, the children are our future. We must teach them as much as we can to best prepare them for the world. And a big part of that preparation– not taught in schools by the way– is helping them understand the world of finances.
Nobody said it was going to be easy, but here are a few creative approaches to teaching kids about money that may help you breakthrough!
Fridge accounting 101
Working for a school, Pamela Britton-Baer spent a lot of time around whiteboards. Perhaps that’s why it seemed only natural to use the surface of her refrigerator to track her family’s finances so that her child could “see” the ebb and flow of their monthly expenses.
The idea came about when her daughter threw a hissy fit one day because Pamela refused to buy her a new pair of jeans. The daughter couldn’t understand where all “their” money went. (Sound familiar?) She was a little too young to go out and get a job, so Pamela decided to show her daughter exactly why their cash disappeared so quickly.
How it works
In big, bold dry erase markers, Pamela wrote their beginning checking account balance on the fridge. Every time she used her debit card, wrote a check, or paid a bill, she “withdrew” that money from the refrigerator account. In essence, she created a “live” version of their checking statement for the daughter to see right there, in black and white, or hot pink and stainless steel as the case may be.
When Pamela made deposits to increase the balance and her daughter started making noises about that new pair of jeans again, she explained the concept of upcoming household expenses and their budget. The daughter got to see first-hand how much it costs to feed their family, and just as importantly, how fast things like gas and those weekly Starbucks trips can chip away at an account balance.
It didn’t take long for the daughter to grasp the concept of home economics. She learned terms like “debit” and “credit,” and what an automatic payment was, and above all, that money really did get tight from time to time, and perhaps she could wait for those jeans.
Expanding to energy conservation
They didn’t stop there. Taking the exercise one step further, Pamela taught her daughter another valuable lesson. Like many children, she had a hard time understanding the importance of turning off a light switch– so Pamela started “charging” her. Using a calculator at CSGNetwork, she figured it cost approximately twenty-cents every time her daughter left a light on in her room or bathroom (or both).
The daughter was surprised to see how quickly those twenty-cent charges added up. By the end of the first week, she owed her mom the same amount as her allowance. When Mom demanded she “pay up” for the bad habit, she refused. That “no big deal” attitude disappeared when it hit her pocketbook.
That got Pamela thinking. With a little creativity, parents could use “refrigerator economics” to track a whole host of other things, too.
- Weekly allowances
- A “refrigerator” savings account balance.
- Loans are given out ahead of a weekly allowance (taking the time to explain the concept of annual percentage rates, etc.)
- The cost of maintaining a pet
- The grocery list
Using the face of her refrigerator was a daily reminder to Pamela’s child that money really doesn’t grow on trees. It taught her fiscal responsibility and the concept of a budget. It’s a life lesson that will carry on into adulthood and a creative way you can bring finances to life for your kids.
Don’t want to use your fridge? A dry-erase board or even a big poster board will work the same!
The connection between ecology and economy
As Pamela’s daughter found, bad habits– like leaving the lights on– can have expensive consequences. Many young adults quickly find out why it’s important to conserve energy when they move out and get their first sky-high electric bill.
“And when you really think about it,” says Neale S. Godfrey, author of “The ECO-Effect™: The Greening of Money,” “ECOnomy and ECOlogy are related in many ways.”
Here are some examples Godfrey gives:
- Organic vs. non-organic: Although organic products may cost more, they are grown and processed without pesticides and are healthier for you and the environment. This increases their value, so it can be worth the expense upfront to prevent medical expenses later.
- Quality vs. price: If you buy a high-quality product, it may be more expensive, but you probably won’t have to replace it quite as quickly—saving you money. It also means that it won’t wind up in a landfill, which is also good for the planet.
- Less is better: When you shop, take time to examine the packaging. Fewer layers of plastic and paper create less garbage, which means that less has to be hauled away to landfills in trucks that use fossil fuels. It saves the environment, and it may save you money. In some cities, no waste types of shops are opening that allow you to bring your reusable containers for your products.
- Save energy, save money If you make your home more energy-efficient by insulating, plugging air leaks, and keeping the furnace or air conditioning unit operating at the optimal condition, you’ll save on energy costs and can reduce your carbon footprint.
Children must learn to make choices that are both economically and ecologically sound. In some cases, they may be counter-intuitive. For example, purchasing an item that costs more but that is higher-quality, which will be less expensive in the long run. But with practice, they’ll get used to the thought process.
Teaching kids about money: The Four Rs
Want to get the conversation going with your kids? Godfrey recommends that you start by teaching them the Four “Rs”:
1. Recycle—and rejuvenate our ECOnomy
Recycling in the United States is a multi-billion-dollar industry that creates jobs for more than a million workers. Share that recycling uses less energy than making things out of raw materials, and companies can also use recycled goods to make new products.
2. Reduce Garbage
The average person in the United States throws away 4.6 pounds of garbage every day. Most of it ends up in landfills, creating land, air, and water pollution. Think of practical ways that your family can cut back on the amount of trash that you produce.
Repurpose items as much—and as often—as you can.
Teach kids to be aware of their environment and to look for ways to reduce waste. If they notice lights on in an empty room, they should turn them off. If they see a faucet is left running, they should turn it off, etc.
The big picture may seem overwhelming, but don’t give up. The important thing is to bring awareness of the issues to your kids and get their wheels turning. And every little step helps. This will create a fundamental thought process that considers the environmental impact of their decisions, something absent in past generations.
Prepare your kids for a healthy financial future
The ideal time to learn about finances is not after you’ve accumulated thousands of dollars of debt and need help getting out. It’s before that bad habit develops. Similarly, the sooner we learn about how to minimize our environmental footprint, the better. Many young adults dive into the world of bills, balancing budgets, and credit and fall on their faces.
As parents, it can leave us in a position to clean up the mess. But we can help prevent these missteps, to some degree, by teaching kids about money as an integral part of daily life. It shouldn’t be a secret or taboo topic withheld from kids. If you share more about your systems and strategies to money management, those practices will be ingrained into your children. As a result, they’ll have a stronger foundation as they venture out on their own.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.