Then bring out a poster with the monthly family expenses listed in a large font. Have them count out the bills to "pay" the bills -- mortgage, grocery bill, electricity, water, sewer, insurance, gasoline, car insurance, piano lessons, etc. They will watch those stacks of green backs disappear just like you do every month. When you've paid all the bills, let them count up how much money is left. This just might be the most sobering moment of their young lives, and will help them understand why the $80 tennis shoes or $150 jeans they want might not be in the best interest of the entire family.
If you are uncomfortable using real money, try using Monopoly money or cutting up green paper and writing $20 on each one. But, as you can imagine, it would be much more effective using the real thing.
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7 comments:
Wow, that is a great idea! I wish my parents would have done something like that, I never understood where the money went until I was much older.
I wish all parents would do this with their children. (Does anyone remember the Bill Cosby show episode where Theo wants to move into his own apartment and Dr. Huxtable does this to Theo?) Truly, I know a few parents who could learn from this, too.
when i was about 12 my dad explained how compounding interest worked. as an example he gave me two hypothetical choices. the first was him giving me $10/day for a month ($300.00 total). the second was to start with a penny on the first day of the month and everyday thereafter, double that amount (two pennies on day two, four pennies on day three, etc.) well, being a math nerd i sat down and figured out how much i would make in one month. on the tenth day of the month you make $5.12 and your total earnings to that point are $10.23. then things get interesting. by the 20th day, you earn $5,242.88 and your total earnings are $10,485.75. after 30 days you will have earned $10,726,930. that lesson has always stuck with me and i've taught it to my kids. even small amounts of money compounded can turn big over time.
When I was 15 years old, I had a freak out in the shower about health insurance. I can't remember the details but I ran downstairs in my towel and asked my dad about it. He told me to get dressed and come back down to his "desk," which was just the drawer under the kitchen bar where he did his household business.
I sat down next to him for the afternoon while he explained how the household money came and went. He pulled out his paycheck (mom got to keep hers) and showed me how much he made, what went to taxes & insurance, and how much was left to pay bills. He showed me his savings, his 401k, and all the outlays except for groceries (that was mom's duty). He showed me the house payment, taxes, maintenance, etc. He showed me the utility bills and the water bills. He showed me the extras and totaled up the car expenses (he always bought a car used and then kept it for 10+ years. He still has a car from 1998 that has 230,000+ miles and still runs!) My father laid all the cards on the table so I could understand.
He calmly explained everything and answered questions. And since then, he's always included me in his financial dealings. While they are nothing fancy or extravagant, they always provide a lesson for me.
I have to say that I'm good with money (aside from the outrageous student loan debt of course. My dad didn't go to college so he didn't have experience with it.) which is a direct result of my dad's lessons.
His imparting his financial literacy on me has been priceless in so may facets. Despite the student loan burden and unemployment, I have done the best I could to save and be prudent with financial decisions. It definitely could be a lot worse without his education. So I'm very grateful for him and our afternoon in the kitchen.
I was always afraid my parents were broke and therefore didn't ask for anything or said no to things I really would have liked. They weren't broke. Although I don't mind being frugal, it would have relieved a lot of stress for younger me to know I wasn't going to bankrupt my parents on another pair of jeans. So here's another vote for being upfront about money with your kids.
What a neat way to get the whole family involved!
I just read "First National Bank of Dad" and it had some GREAT ideas for teaching kids about money.
Highly recommend it.
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