What Does Your Kindergartner Know About Personal Finance?

1 - What Does Your Kindergartner Know About Personal Finance- - Header ImageWhile money isn’t usually a dinner table topic with young children, some would argue that it should be. From a young age, kids are already learning about sharing, trading, and the value of different objects or toys – why not take advantage of it to incorporate lessons about being smart with money, too?

Here’s how you can start.

First: Don’t start with money

Consider laying the groundwork for sound financial management by focusing on a host of behaviors around money, rather than money itself.

Patience, objectivity, and compromise are critical skills that can make it easier to learn how to save, make choices, and balance priorities later in life.

To help get started, try:

  • Encouraging your kids to try out new skills, puzzles, or games that are outside of their comfort zones. Kids naturally gravitate towards learning, but some struggle with patience or fear. Gentle encouragement and cheering the fact that your kid is trying can help to build positive associations with hard work and sticking with a difficult task.
  • Empower kids to make choices. Wherever it’s feasible, offer choices. It gives kids valuable practice in making decisions, and as their abilities start to expand it will give vital feedback in the form of consequences. You might start small (“Do you want to wear your elephant sweater or the striped one?”) before allowing increasing levels of self-sufficiency (“It’s raining, what do you need?” or even “Please get ready for school”).
  • Encourage games and activities that present trade-offs and compromises. As adults, we are constantly balancing priorities and making compromises. Get a leg up by helping your kids to see beyond their own desires and find ways to address competing interests: maybe that means giving an older child the lean in deciding which park to go to so that a younger sibling can also have fun, or in helping to select the best menu for a special dinner.
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From recent college grads saddled with debt to wide ranging concerns about financial competence among consumers, there’s spreading worry that kids aren’t prepared for money management and decision-making.

Introduce the concept of work

Kids usually know that mom and/or dad work and that their jobs have something to do with finances, but the trade-off between labor and money isn’t usually obvious to small children. Make it so: explain to your kids what you do all day and how that translates to your family’s budget.

If it’s feasible, you could even invite your child to your workplace to see where you spend all that time. They’ll have a better idea of what it means, and it’ll make the whole process less mysterious.

When your child gets older, they might even seek out ways to work for something they want. For example, if your child takes expensive lessons, find out if they can help out to offset the cost, or talk about ways to earn a little extra money to finance their hobby.

Outside of the immediate financial benefit, this entrepreneurial mindset can last a lifetime.

Tie it together

As your child learns masters the psychological aspects of financial management, it’s time to introduce the concept of money itself. Here’s how you can start.

  • Talk through your own choices. While children are experts at selective hearing, they also absorb far more than we realize. Take advantage by getting in the habit of narrating your financial decision-making processes. For example, if you’re at the grocery store, you might say: “This chicken is on sale so it costs $1 less per pound. That means we can buy more chicken for the same price.” If it fosters conversation, all the better!
  • For kids who know a little basic math, ask for help: If you’re shopping for groceries, give your child a $5 budget, show him or her how to use the scale, and make it a game to get as many different fruits and vegetables as possible for the price. They key: you have to eat whatever you get. If that means a week’s worth of potatoes, so be it – this is the perfect time to have a conversation about the balance between cost and benefit!
  • Try the “3 jars” method of money management. As soon as your child starts handling money, introduce the 3 jars method: one for spending, one for saving, and one for sharing. Empower your child to make choices about how to split their income, and talk about the benefits and drawbacks of each. Saving might mean less candy now, for example, but it could also mean a larger toy later on.

Growing with your child

As your kids grow, you can gradually incorporate them further into your financial life. That might mean talking about your vacation budget or even how to allocate a tax refund or year-end bonus. Later, you might include lessons in investing and the difference between debit and credit cards.

Most importantly, encourage discussion, questions, and conversation. Kids often hear mixed messages about money from the world, so keeping yourself open as a reliable resource can help mitigate the confusion and help foster a sense of financial control and empowerment that lasts a lifetime.

Do you want to do more to help make your kid a money master?

Download our free roadmap to teaching kids of all ages about money! It’s an invaluable guide to building the skills and mindset for a lifetime of better financial decision-making.

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Budget Or Bust

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From recent college grads saddled with debt to wide ranging concerns about financial competence among consumers, there’s spreading worry that kids aren’t prepared for money management and decision-making.

Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

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Important disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.

Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.