Don’t Stay Mum on Money, Mum! Part Four

Monday, December 14th, 2015

Children by this age should have savings accounts, but if they don’t yet have one, it shouldn’t be cause for panic and you can calmly think about setting one up. In the previous blog post I discussed the benefits of setting up a bank account for children that are aware of what it means.

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9-12: What to Communicate and How

Earning Money

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What to Teach

Children by this age should have savings accounts, but if they don’t yet have one, it shouldn’t be cause for panic and you can calmly think about setting one up. In the previous blog post I discussed the benefits of setting up a bank account for children that are aware of what it means. Obviously, for 9 to 12 year old’s the sensation would be, at the very least, the same. The pride they would have and show would be immense and there’s no reason to stop there. Once they have got their heads around their newly established savings account, have had the experience of depositing money and have had the discussions with you about saving money, it is time to introduce them to a new feature in their lives: fixed savings accounts. Once you’ve explained the importance of saving, you can introduce your children to the different methods of saving and then have them join you in setting up their own fixed savings account. Discuss how interest works and inform them of the many different types of savings accounts one can invest in and the difference between their benefits – covering bank fees and interest. Setting up long-term goals with their money introduces them to a whole new world of finance and will ultimately be beneficial for them in the long run. Children by now should have some awareness as to how money is earned. We previously looked at the different ways to enlighten them, with methods such as chores and bringing your child to see your work space to learn what you do to make money. Broaching the topic of investments and interest would seem like the logical next step, so don’t be afraid to take it. Your children are young, yes, but that is to their advantage. They are primed to learn, even if it’s with a lack of understanding, by simply planting the seeds of knowledge, there is something to nurture as they grow up to become financially savvy adults.

What Can Be Learned

As it goes, children learn best by seeing and doing, as we may have discovered with simple activities such as them accompanying you to work or performing their own chores. There are plenty of activities to have them engage in to expand their knowledge of money. Have them research the going rates of their daily chores as performed by adults. How much does a baby sitter – or au pair – earn? How much do the garden service professionals earn by mowing lawns and tending to gardens? Or how much does a cleaning service employee earn for cleaning homes? What are the costs for hiring someone to perform the chores children can handle easily enough themselves? They’ll soon learn the benefits of a bit of gardening and cleaning, taking out the trash and doing the laundry or dishes. Have them decide if they want to clean their space or contribute toward the salaries of staff that are employed to care for your home and property. There are ways to make them aware of saving money by cutting costs, but then there’s still the topic of making money.

By the ages of 9, 10, 11 or 12, children should not only be aware of money and how it is earned, but should ideally be interested in how they can get involved in the proverbial rat race. A little entrepreneurial spirit should be blossoming and if it isn’t, for any number of reasons, a little bit of encouragement would go a long way. Get them passionate about business by finding something to market or sell. If they are competent at a particular service, encourage them to advertise it and see it through to reach an end product and its appropriate reward. Getting them involved in a cake sale is a great idea. Too often these days, the parents are left to man the stalls at school cake sales while the children get riled up on sugar and then run around more aimlessly than ever. Rather, and even if its once in a while, have them join you behind the counter and for a short while forget about what the other children are doing and learn something about homemade bake goods retail. They’ll soon learn that earning money is not as fun as chasing children with a mouth full of cake, but it is of more importance. What would help facilitate this is if the children were actively involved with the creation of the baked goods or crafts that are sold at the mini market. That way, they bring with them an element of pride and would be far more eager to sell the goods knowing they had a hand in making them.

Another good idea is that of offering a service, such as mowing lawns or washing cars, or babysitting the younger children at events in which the adults are absorbed in their social interactions. Simply, harmless jobs most children could perform or participate in that would greatly advance their idea of responsibility and finance. Something they could get involved in, which reverts back to sales and running a stall, is the setup of a yard sale – as it’s called in the US – but one that is perhaps organized by a party of adults. Joining a local mini market where you can set up a stall is a great opportunity to put to practise some skills and lessons the children have been learning. Task them with gathering together their old and unwanted possessions, from toys to books to clothes, and then get them to decide what can be resold and what prices they should go for. Once they have chosen what they wish to sell and for how much, don’t let them stop there. Encourage them to see it through by accompanying you at the stall, engaging with customers and most importantly, the handling of money coming in and going out. They should be able to make change, or be able to learn how to make change, and operate a till, whether it’s a tin box or an actual till. The cashier and sale responsibilities will only advance their understanding and learning of matters to do with money. And you never know, but by involving them in such activities early on, you could be raising the next Richard Branson.

Managing Money

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What to Teach

Earning money is one aspect of finance and managing money is another equally important responsibility all adults will face. Discuss and predict consequences of spending with your children and teach responsibility – as a parent would ordinarily – but with money in mind. As they get older, certain realities are due to be introduced and the sooner children become aware of them, the better they will adjust to the concepts before reaching adulthood and the proverbial deep end they were fated to fall into. Explain the realities of health insurance and life insurance and the consequences of not having either. The next time anyone is booked into seeing the doctor, for whatever reason, discuss with them the benefits to having medical aid and the sometimes dire consequences to not having assurances such as a hospital plan. Touch on the costly prices of medical treatments and services, so far as the dentist, and the added benefit of eating healthily and taking care of their bodies. Delicately get into the subject of life insurance and once again the benefits and consequences there are to having and not having life insurance as an adult and one who is providing for a family especially. You could go into the insurance of household possessions and property and explain why it is needed, with the threat of loss through theft or fire, for example. Inform them that insurance is a monthly expense that could potentially save them money in the long run. Another aspect to the world of money are credit and debit cards. Explain to your children the difference between the two and if you have to, teach it to them slowly. Simply mentioning it will fertilize the soil or plant the seeds of the concept to which you nurture over time. Explain to them that their savings account has a debit card – as it would most likely. And then touch on the benefits and consequences to credit cards.

What Can Be Learned

Once again, children need more than discussions and verbal lessons on subjects. The practical activity of performing or witnessing tasks increases their ability to learn and absorb the necessary knowledge. Get your child to read price labels, compare bulk prices and discuss budgets. They should be becoming aware of the cost of things and the varying values of things and how they are determined. Food for instance can cost the same as a toy or and appliance, but will not last as long simply because food is consumed more rapidly. This will help them recognize what is needed and what is wanted and help with their understanding of the difference. Does it cost a lot of money because it is a necessity or because people really want such items? Try to give them a small amount and challenge them to make good decisions. Such as the supper budget task. Give them a budget of your choice and bring them to the store to encourage them to try shop for the ingredients required to make supper that night. Naturally, you would want to guide them and they’re going to need your assistance, so get involved, but motivate them to do as much of it as they can and explain in detail the actions you are required to perform as the adult. Experiment with a product’s quality by buying one version one week and another version another week and compare the differences. Is the branded product better in quality and worth the extra money, or is the generic version the same or even better? Is it worth buying in bulk or do you stick to buying things individually or in smaller amounts?

This Week’s Book Choice

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Growing Money: A Complete Investing Guide for Kids – Gail Karlitz and Debbie Honig.

According to a review on Amazon, “‘Growing Money’ is the best book about money ever written for kids. This book is so straight forward, easy to understand and comprehensive.” –Peter Montoya, Financial Services Marketing Expert. Amazon describes the book as follows, “Never before has there been a time when the economy has been so much a part of our daily lives. Today’s young investors want to know the basics of finance – especially how to make money grow. This complete guide explains in kid-friendly terms all about savings accounts, bonds, stocks, and even mutual funds!” The age range specified is 8 -12 years and is exactly what your 9-12 year old should be listening to – or reading – if you want to give them an extra boost on their journey to becoming financially savvy adults. It is written specifically for young minds, so for the most part you won’t be a translator to the advanced language most books on finance would have. It explains the different types of investing, such as savings accounts, bonds, stocks, and mutual funds and then provides the necessary information to help make decisions on each kind of investment. It is a book worth considering and one worth owning. As we very well know, financial knowledge decays, so having this in your book shelf is a great idea. Considering it is almost Christmas, I can’t find a good reason for you not to add this to the shopping list. And the excuse of affordability is too ironic to use, so just go get the book and put it to the test.

 

By Clinton Walker

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