Before scaring them with concepts like debit card overdrafts and bank foreclosure, you can start by taking them shopping and making them aware that advertising exists to try and part fools with their money.
Play shopkeeper. And watch your kids figure out how to get the most for their money while you walk through hypothetical shopping scenarios. As this StopBuyingCrap.com post explains, “When I play store with my daughters, I see that it helps them prioritize and begin thinking about the consequences of foolish spending. That’s right — I dish out my best financial decision-making assignments surrounded by picture books, fancy shoes and feather boas.”
Don’t rely on schools alone to teach them financial lessons. Instead, take the lead yourself, explains Frugal Dad, who suggests real-life experiences like taking your kids to the grocery store and the bank to show them how it’s done—and also, even buying your children a share of stock from a company they like, such as Disney or McDonald’s. Funny: My dad did the same thing for me a long time ago, and I actually wound up making pretty significant money on my one share of Coca-Cola I bought sometime in the early ’80s.
Set an example. Preaching to your kids about how money should and shouldn’t be used won’t do anyone much good if your children know that you don’t follow your own advice. So, as TheMint.org says, be sure to model good financial behavior. Because we all know that “Do as I say, not as I do” doesn’t get you very far.
School them on advertising’s true purpose. To kids, it’s not obvious that ads exist to convince you to do something—most likely, to spend money on a product you don’t need. To raise a child who is going to make informed choices, you must first explain that advertising isn’t merely more entertainment, and that buying into an ad’s message isn’t in the consumer’s best interest. A government-sponsored initiative and website called Admongo.gov was created to help kids understand ads and to think critically about them. Admongo is a virtual world where—not unlike the actual world—you’re constantly bombarded with advertising. The site’s efforts are explained more fully in this NY Times piece.
Discuss your own financial ups and downs. According to this Kiplinger post about teaching kids financial literacy, one good way to connect with kids is with simple storytelling. For example, a banker explained how, when he was young and broke, he invested $5 in soap and a bucket and turned that investment into $500 by washing cars.
Take them shopping. No, not like on a shopping spree, but to allow them to see with their own eyes how, for example, one loaf of bread costs $2 less than another, and how all of your supermarket purchases can quickly add up to serious dough (excuse the pun). ShopSmart magazine suggests occasionally giving kids a set budget, which they can spend as they choose—the lesson being that they must live with (and sometimes regret) the results of instant gratification.
Have a talking Clementine teach them about stocks and diversified portfolios. That and other money lessons are available at ING Direct’s Planet Orange, a website designed specifically for kids.
Teach kids that it pays to read. This is true figuratively, and quite literally, via TD Bank’s Summer Reading Program, in which the bank will pay kids $10 for reading 10 books this summer.