Money and Kids
Teaching Young Minds
about FINANCIAL LITERACY
My husband and I look at our kids as sponges that easily absorb anything we model or teach them. One important lesson that we would like to impart to them is financial literacy.
My husband and I feel the need to incorporate financial literacy as we homeschool our children in Bacolod. It is not a regular subject but a way of life, injecting lessons here and there that we hope will guide them in their future choices.
That is because past experiences have shown us that learning about money management mostly came from books, magazine articles, seminars, and of course parental counselling, as it is not taught in school and not really modeled at home. We are taught that finishing a good degree will help us earn bigger incomes in the future but we are not taught how to properly handle our incomes. We think that both goals should be taught hand in hand because no matter how big your earnings are but you don’t know how to manage it well, you can still end up broke.
So as parents, I think that it is it is our primary role to lay the ground work of financial literacy to our children.
In our home, we have made it a point to introduce our children to financial concepts according to the levels that our kids can comprehend them. Here are the ways we taught financial literacy at home. We may not be perfect and I think that we can still do more, so we keep on researching ways to do it.
Our keyword in this journey is PRUDENCE. We are not wealthy, but I think we are quite prudent with what we have.
1. The concept of money. Well primarily, kids need to know about the existence of money. Food and clothes do not just magically appear in our cupboards and closets – we buy them using money. In the same way, education does not just happen – it is paid for with money. And kids need to understand where money comes from. One of the things that have helped us teach financial literacy to our kids is an animated series on YouTube. In short videos, the concepts of where does money come from, how does money circulate, how does money get used up, and many more, are taught in an interesting way. We also tell the kids that our money comes from earnings from work and business.
2. Coin banks and savings. We often get coin banks and from birthday parties—use them to teach kids to save up money. Encourage them not to take out coins until the coin bank is full. When you open it, make it ceremonial and involve them in counting the money that they have saved. Praise them for being good savers. If you don’t get coin banks for free, use cans or soda bottles. Buying new ones from the store is not really prudent.
3. Play money. Play money has given our kids valuable lessons in trading. We have a toy cash register that we use to buy imaginary stuff, that way they are aware of the exchanging of currencies as we buy merchandise.
4. Paper bills. Aside from coins, the kids were exposed to paper bills at an early age because of the money gifts that they receive. It is actually pretty basic, but we do tell them that these money bills have more value than coins. And we have to save more of them than the coins. Even our youngest daughter when she was just more than a year old knows the difference between these paper bills and play money. She knows what real money is like.
5. Investments. We throw the word “investment” around like it’s a pancake or chocolate. The kids may not necessarily understand the full concept of the word investment, but at least, they are already conscious about it. I started bringing our eldest at 4 years old whenever I went to top up on our mutual funds. I would tell her that we “invest” our money so that it will “grow”. We tell them that investing is better than merely putting their money in the coin banks because investments make their money earn. So their money doesn’t just end at the coin banks–they go somewhere and not just the store. Simple concepts like these will eventually reap results. In my case, I only heard about the word investment when I was already working.
6. Making choices. We do not just save and save. That’s not reality. In real life, we know that we have to make choices. We have to buy things. So for example, our kids get money gifts. We tell them how much they have and we encourage them to save most and to set aside a certain amount in order to buy something that they would like. We give them a budget and they stick to it. Last Christmas, the little one was not able to buy anything because we offered her P200 to spend and she asked for a “red car and a blue tricycle.” Real ones, not toys. So we ended up not buying anything at all because she could not afford what she wants. Additionally, we guide them on what to buy, like things of value as opposed to things that only give temporal pleasures.
7. Needs vs. wants. Our kids are not very demanding when we go out. I know that there are other kids who would throw a fit if not given what they want at the toy store and such. But there are really times when they would ask for something that they like. In appropriate instances, we explain why we buy certain things because they are needs as opposed to some things because they are just wants. Needs are non-negotiable and wants can be done without, especially if they do not fit our budget.
8. “We don’t have money.” My husband and I have made it a rule not to say “We don’t have money” as a reason not to buy something that our kids would like to have. It is not very healthy and will leave a negative impression on the kids. They will feel deprived and when they get to have money, it is likely that they will splurge on their wants. Instead, we let them understand. If you are really short on cash, you can honestly tell them that your money is intended to be spent on your needs, like grocery, electric bills, their school dues, and such, instead of just telling them flatly that you don’t have money because technically, that may not be true.
9. Saving for what you want. So we have another kind of savings–the savings for what we want to have or happen. It could be travel, a new gadget, and such. While the popular concept nowadays is You Live Only Once (YOLO), this may not exactly be good for our financial health. It has been established as a fact that many young ones now invest on experiences. While that is a nice thing and we also do that, we also have to balance it otherwise, we would tend to overdo the “experiencing” part.
When our eldest Dindin was younger, we have decided to bring her to international destinations as part of her learning. But we said we will do it when she is already older and able to understand our travels because after all, the goal is for education. We thought that we would first bring her to Hong Kong in order to visit Disneyland. At 3 years old, we started her on her travel fund savings. When we opened her coin banks the first time, we then opened a kiddie savings account in the bank for her so that we can deposit the bills that she has saved. She would go with her Papa to the bank to deposit her money.
But then our little one came along when Dindin was four. So now, we got the two of them saving up for their Hong Kong trip. We are doing this in order to let them know that as a practice, travelling should be done when you have enough money for it. We want to impart to them that they have to save up for their travel and not loan any amount for this purpose. There is much more gratification in that. Despite the fact that travel loans that are offered by banks and credit card companies, it is our desire that our children will see the value of saving up for their trips.
10. Our money and their money. For some parents, they do not delineate the kids’ money and their money. For example, a child may save up his allowance for something, either to deposit or to buy something. Then the mom “borrows” the savings in order to pay up for something and then eventually forgets to return that money to or deliberately ignores to pay the child. While technically, it is the parents’ money in the first place, we have already entrusted it to our child or children. We have “given” it to them. How will they learn how to manage their money or how will they be encouraged to save if we “harvest” their savings and don’t pay them back? And it’s a bad practice, too, as it is like telling kids that it’s okay to skip on your debts. This also applies to the money gifts they receive. In our case, we save up their money gifts for their future funds. And now that they have a travel fund, we let them decide how much we put in for their investments and how much for travel fund.
These are some of the basic things that we teach our children. I will make this into a series and will write more about our money practices at home.