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So, I talked to Ronella Ellis-Frierson, a practicing Marriage and Family Therapist in North Carolina, about when a conversation should begin with your child about money and saving. She believes that the conversation should begin “as soon as they start to grasp the understanding that things have a cost” which could be as early as 3 or 4. “It happens at different ages for different children. I used to have budget meetings with my first daughter when she was 2 or 3. It all depends upon the child.” Then, I went on to ask her how to talk to children about money and budgeting and she said “it is a matter of teaching them that it is about appropriating at a basic level. They learn in blocks, in groupings. It is teaching money in the sense as it is another way of grouping.” Her overarching point for talking to younger children was to “keep it simple” and as they grow add more complex terms and ideas.

The Action Plan

So, one way that I believe you help children to understand the importance of something is to show it to them visually. I envision an area on a dresser or, if space permits, a shelf on the wall with something cute stenciled above it like Bank of Abigail (made-up child’s name) and her cans placed neatly on the shelf. (I image old used coffee cans or, if you have a few bucks to spare, clear jars.)Until Abbey is old enough to understand money (the parent can gauge that as she grows), you can set up 2 cans or jars in the Bank of Abigail: “Savings” and “Spending”. Each week she will have her allowance divided into these cans. A nominal allowance can be given to Abbey to clean up her toys, to help Mommy and/or Daddy around the house and garden. Once, she is old enough to start doing chores like taking out the trash and clearing the dishes from the table I will introduce another idea: expenses.

Let’s make up another child so I can explain. Let’s say Bobby is 7 (giving an arbitrary age where a child does some chores and understands basic concepts…but each child is different). So, Bobby’s mommy and daddy can explain to him that 10% of his allowance has to go to household expenses. But, this can be explained as Bobby giving $0.50 back to Mommy and Daddy for groceries, laundry, and trash collection. Those things are a cost for Mommy and Daddy. And, that helps to show Bobby about bills.

As Bobby gets older, two more cans or jars will be introduced into the Bank of Bobby. So, there will be 4 cans at the Bank of Bobby: College, Special Occasion, Fun Spending, Savings. Bobby’s $4.50 can be divided between these cans as he starts to understand these concepts. The College Can to be used for creating a savings account to pay for college, the Special Occasion Can money for birthdays and holidays, the Fun Spending Can for new toys and puzzles, and the Savings Can will be for Bobby’s bank account.

The last part of the action plan is showing a child, through action, how important saving is. Mommy and/or Daddy can take Bobby to the bank once Bobby is old enough to know his full name, address and telephone number and open a bank account. Then Bobby and Mommy and/or Daddy can go to the bank every month or quarter to deposit the Savings Can money in the bank.

I will, most likely, do a post at a later time about how to talk to your kids about credit…

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This entry was posted on Wednesday, March 11th, 2009 at 11:42 pm and is filed under Living. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.