Teaching kids about the value of money can be hard, especially these days when most of our day to day money transactions are done online, with our ATM card or cell phone. But the earlier your kids start good money habits the better, so here are 4 fun activities that will teach them lifelong money lessons without them realizing it.
Lesson #1 - Money doesn’t grow on trees
It’s the classic phrase we use to steer our kids away from the toy section, but, in order for your child to understand that money is earned, not given away, you’ll need to demonstrate how hard work and effort can lead to financial rewards.
It’s time to pull out the monopoly money (or get crafty and make up your own family-crested currency). Sit down with your kids and together, list out every chore or activity you all have to do in a week. Everything like grocery shopping, cooking dinner, stacking the dishwasher, school assignments, even walking the dog. Have your kids help you assign a monetary value to each chore.
Now, make your kid the family boss for the week. It is their responsibility each day to assign tasks and then pay each family member (including themselves) the money earned for completing a chore. Put each person’s name on jars where the money is placed so that they can see it piling up over the week as you all complete your chores. At the end of the week, add up the amount earned and then use this to discuss how each of you would spend, invest or save the money if it were real money.
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Lesson #2 - Budgeting is about planning for the things you want
Not too many kids wonder how your family can afford the things that you enjoy. Things like a Friday dinner out, a Sunday movie session or your annual family vacation. We know these things come through budgeting and saving. And the biggest lesson to teach your kids about budgeting is that a budget isn’t there to restrict your life, it’s there to help you plan for the things you can and want to have.
Get the creative juices flowing by creating a family spending plan. Have a family session planning what you’re going to spend money on over the next year. Don’t limit your plan to fixed expenses like mortgage payments, utilities and food though. Include things like how much you want to spend on entertainment, clothes and vacations. Get your kids to customize the plan with cardboard, colors or funny photos, while listing their short and long term goals and when they’d like to achieve them by. The key for every family member is knowing that you won’t be able to meet your goals by poor or lazy spending habits. What do you all need to do to help you meet your family spending plan?
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Lesson #3 - Interest rates are a double-edged sword
Once your child grows up and starts earning a wage, interest rates will be a massive part of their daily life, yet research shows that few people really understand how they work. It’s important to teach them now how interest rates can either add to your wealth or send you into debt.
Ask your child to be your banker by asking them for a small loan. Explain that you will pay them back ‘with interest’. Agree on an interest rate and a date that you need to repay the money by. For instance, say you borrow $5 from your child. If you agree on a 10% interest rate, when you give the money back, you’ll give them $5.50. Help them to understand that the 50 cents represent the cost of having to borrow the money. Just don’t be surprised if they get too clever and start negotiating for a higher rate the next time!
Lesson #4 - Be responsible for your choices
No one is going to take more interest in your financial well-being than you, so it is important to teach your kids to take an active interest in money and decisions that affect every household financially. For instance, have you ever talked to your kids about the cost of electricity and how every action they make around your home contributes to the power bill?
Play a game of ‘eye spy’ an electricity waste. Ask your kids to help you work out ways you can save on your next power bill. Show them how much you pay now, and give them a challenge to help you reduce it by 10%. If you need some extra tips for slashing your bill, check out Mozo’s kid power article.