Raising Money-Smart Kids in the Early Years

Although high school is a terrific time to teach kids key personal financial concepts before they’re nudged out of the family nest and go to college, you can and should begin to teach kids about money much sooner. The latter preschool and elementary school years, when kids are learning math concepts and getting comfortable with numbers, are an excellent time to lay a solid knowledge base.

According to a survey conducted by the National Bureau for Economic Research, children who get personal-finance education in high school save 5 percent more of their future employment incomes than kids who aren’t exposed to such education. Five percent may not sound like a lot, but when you consider that most adults should be saving about 10 percent annually to accomplish their financial goals and actually save less, saving 5 percent more is a huge difference.

When you welcome a new baby into your family, he needs you to do everything for him. You must feed him, clothe him, change his diaper, and so on. Slowly and gradually over time, your baby learns to do some simple things like beginning to crawl and then walk. That creates a whole new set of hazards as the more he is able to move on his own, the more trouble he can get into!

In the early years, you will need to make all the choices for your children with regard to spending money. Eventually, as they go through the preschool years, they will begin to understand that you buy them things and they can have some influence over those purchases and decisions.

Educate when shopping

One of your child’s first money lessons is likely to come by accompanying you shopping. Take her grocery shopping so she can see all the items available for purchase and the price on each of them. You can explain to your child how you pay for food and how the money is earned in the first place. She can also learn how to comparison shop and live within a budget. (Note: I don’t generally think you should share personal financial information like your salary with your children. This is highly personal information, and kids don’t have a context for understanding it nor can you be sure that they won’t share it with others.)

Kids obviously get much more out of shopping when they’ve been introduced to counting and basic math. This typically happens late in the preschool years and early in elementary school.

Of course, you don’t have to visit a physical store to teach your kids these concepts. You can plop them down at your side while you shop online, but when you do that, you lose something, I think. But online shopping is certainly more convenient, especially for time-pressed families.

Being a smart consumer requires doing your homework, especially when buying more costly products. Teach your kids the value of product research (including using sources like Consumer Reports for product reviews) and comparison shopping. Demonstrate how to identify overpriced and shoddy merchandise. Finally, show them how to voice a complaint when returning defective products and go to bat for better treatment in service environments, two additional tasks that are part of being a savvy consumer.

Take your kid to work

Even better, I think, than taking your kid shopping and focusing on the consumer and spending side of money, how about talking to them about your work? After all, this is the reality that most people deal with for most of their adult years.

I’m not suggesting that you need to tell your kids everything about work, but when your children are young, you can certainly explain the basics of your work and job. You can begin by describing what your job entails and who your employer is and what, broadly speaking, your employer does. Importantly, you can explain how you get paid money to perform your job and that money helps provide and pay for the things that your family needs and wants like your home, food, clothing, car, medical and dental care, vacations, and so on.