written by Laurie Lafortune
Financial literacy refers to the skills and knowledge that allows a person to make informed decisions about money and other financial resources. Financial literacy for kids? That sounds kind of complex, and over their heads. But your children will have money at their disposal from quite a young age. Birthday presents of cash, gifts of money or store cards from grandparents will start coming their way. Kids as young as 3 can understand buying and spending, and saving.
We don’t want our kids to reach adulthood and suddenly be thrown into the real world of budgeting. We all can tell stories about many young adults (and older adults) who struggle with financial decisions and are unable to manage their income and expenses. Money worries are one of the biggest causes of family breakdown. And a lot of the money worries come from spending beyond income.
We need to start teaching our kids financial management skills from a very early age. Here are some suggestions for school age children about shopping.
When shopping for clothes, it can be easy to overspend. Kids might not understand the difference between needs and wants. Rather than buy something for each child in an attempt to treat each child the same, take the opportunity to teach the difference between needs and wants. For example, one of your kids may need new shoes because the old ones are too small, but another sibling’s shoes are still in good shape and fit well. You can explain that the shoes are needed, and that maybe soon the other child will get something new and her sibling won’t. Go through the closets and shoe shelf together and see what is really needed. Keep items clean and in good repair, and be sure to model taking care of shoes and clothing.
Try to shop in the off season. For example, summer clothing is often on sale by June, before the weather has even gotten hot. You can show your kids the price tags and sale prices and go to the sale racks first.
Comparison shop. Kids need to know that the same item can have different prices at different stores. On-line shopping can be inexpensive, but be sure to show your kids the sometimes hidden costs, such as shipping.
Kids need to know that using a debit (or credit) card is spending. One parent tells a story of explaining to her young child that she didn’t have enough money to buy a toy. The child’s response was, “Use the bank card.” This was certainly a teachable moment to help children understand that a debit or credit card is not an unending source of money.
If you think something is too expensive, such as a certain brand of jeans, have a set amount in mind that you had planned to spend on the new jeans. If that isn’t enough to buy the brand they want, they might want to use their own savings to make up the difference. This helps children identify how much they really value that purchase. Sometimes, what happens is the child decides they don’t want those jeans so badly after all, not enough to warrant spending their OWN money on them. Or, they realize that they could buy a less expensive brand and still have money left over for something else. You may need to explain that if you pay that much for jeans, there will be no money for other needed items.
This is a good life lesson. As adults, we have to make purchasing decisions, do without some things, resist having to have the ‘latest’ thing, and delay many major purchases. Successful parenting includes teaching and modeling financial life skills. There are a lot of great parenting resources about financial literacy for kids on line.