NEW YORK (MainStreet) Like hygiene, personal finance is a collection of habits you practice daily throughout your life. Developing these habits early on will ensure you abide by them more stringently. Recent studies by MassMutual show nearly three out of four parents feel it's important to teach their children about finances and 83% of moms who participated say they play an active role in teaching their kids at an average age of around six years old. Yet with so many young adults living with their parents, something is clearly being lost in translation.
Why can't they dance like we did? You need these economic leeches out of your houses A$AP so you can retire, but, in order to accomplish this, these fiscal parasites need to learn a thing or two about finances. To assist, we gathered a panel of finance experts, parents and teachers in order to share creative, innovative and practical financial tips for teaching kids the ins and outs of their wallet. Here's what we found at the intersection of Sesame Street and Main Street.
1. The Culture of Instant Gratification
The Internet is a gift and a curse; we have the collective knowledge of the world at our fingertips. It's easy as a parent to give your kids an electronic device to distract themselves while you work on making gravy, but those devices provide instant gratification to both the parent and child. If every day is Christmas, it loses meaning, so it's important to teach children discipline as early as possible.
"A couple years ago, my 9 year-old son really wanted a Nintendo DS," says Kyle James, founder of couponing site Rather-Be-Shopping.com. "The sticker price of $150 was shocking to me."
James saw this as a great time to teach his son the value of bucks by suggesting he try recycling as a way to earn legal tender.
"He jumped all over it," James said. "Not only did he save and sort our recyclables, he also hit up all his grandparents for theirs. He finally saved up enough money for the Nintendo DS. It was a great experience for him and taught him that money does not just grow on trees."
By forcing him to work for the video game system on his own rather than simply giving it to him, James taught his son a slew of valuable lessons in applying management, entrepreneurship and hard work while waiting for the huge payout at the end. The gadgets kids use (video game consoles, tablets, smart phones, etc.) are filled with ads and paywalls that encourage spending, so teaching your kids the concepts of patience and dedication are vital. Otherwise, you may enjoy our tips on getting your money back from your kids' purchases.
2. Nothing in Life Is Free
You're not the bottomless money pit your kids wish you were, but there's also no reason to keep rubbing how hard you work in their faces; an allowance already teaches those lessons. Instead, find creative ways to illustrate the bigger picture of wages, bills and the economy to your kids. Marie Phillips, the owner of FamilyMoneyValues.com and a proud grandmother, does this by running Grandma's Money Camp each year with her grandchildren, filled with a variety of activities to keep kids having fun while learning.
Says Phillips, "A couple of the kids favorites are: listing and selling one or two of their toys on eBay during the week; the 'compound interest jar' where we start with a couple of dollars and let the kids calculate a 50% interest rate each day and add the money to the jar (they get to split the proceeds at the end of camp), and, of course, their annual kid business -- one year they washed cars, another they built a drink stand business and last year they sold handmade soaps."
3. You Get What You Give
People sometimes brag about the money they have and the stuff they can buy with it. At some point or another in life, everyone wishes he could live extravagantly. But to get there, working hard isn't enough; when kids leave your protection and enter the workforce, they'll be paid by how hard they work at the right tasks.
"I've given my children an allowance since they turned 4 years old," says Cathi Doebler, author of Ditch the Joneses, Discover Your Family, a guide family budgeting.
"The amount they earn per task changes based on their age and the difficulty of tasks that they can handle," Doebler said. "For example, my older son sometimes earns more than my younger son when he does more difficult tasks."
This valuation of labor allows Doebler's kids to see how additional tasks are viewed by society. There's a certain taboo in the workforce about discussing how much bread you make, and it's possibly connected to people tying their income to their self-worth. Instead, train your children to correlate their salary with the amount of effort they contribute to whoever's paying them. There are still chores you have to do for yourself, though there's a twist, as Doebler points out.
"I also have some tasks in our household that they are always expected to do without getting paid, such as making their beds each morning and helping with certain chores outside like raking leaves," she said.
4. Thrift Shopping Pre-Dates Macklemore
Spending gets complicated, because there are so many things to spend money on and so many easy ways to do it. It's difficult to explain to kids why their parents are able to afford seemingly whatever they want while kids can't. Jill Jacinto, Editor at WORKS, a career, finance and lifestyle site for women, reveals how her mom taught her to shop:
"My mother taught me that I could get the brownie or ice cream with my allowance or I could save it in my piggy bank for a much larger item that I would really love - whether that be a Barbie, computer game or cassette," says Jacinto. "I understood that I wanted the Barbie more than the brownie."
It's important to teach children not only to shop for low prices, but also to value what they purchase. Saving $1 on generic Pop Tarts doesn't mean much if you don't enjoy the flavor. There are a million breakfast options if you're going to choose a pastry, get the one you like, and pinch pennies elsewhere to make it possible.
5. It's a Cool World
It feels like every day we hear another story about kids bullying each other online or doing something stupid on the Internet. This past November, McAfee gave MainStreet some great statistics on what kids are doing online. With so much fear in the air, it's tempting to pull your kids offline entirely. Unfortunately, we live in an increasingly technologically connected society, and not allowing your children the freedom to explore the world through the web could have negative impacts on their future career prospects.
Nancy Guberti, MS, CN actually encourages her children to use the web to teach them entrepreneurship. They now have personal blogs and run an entrepreneurial site for teenagers called Teenager Entrepreneur.
"I encouraged them to earn their own money even at an early age," says Guberti. "And now they're 16 and 17, and running their own businesses, publishing books, selling them to schools, and gearing up for a summer boot camp, teaching other teenagers how to take their passions and turn them into businesses."
To arm her kids with the savvy to apply their business spirit in the real world, Guberti focuses on teaching her kids real-life examples, rather than droning on about numbers and concepts in books. She teaches them the real-world processes of making, saving and spending greenbacks, helping her teens incorporate wealth into the lives they want to live, rather than pursuing some unobtainable carrot on a stick.
6. The Grimm Reality
Kids need to be taught that capitalism isn't just some fairy tale they're disconnected from; it's the reality of the world in which we live. The only way they'll make legal tender is by taking it from someone who does when they work, someone is paying their cash in exchange for someone else's labor. When they shop, they're giving their funds to someone else. Internalizing personal finance and financial responsibility is the only way they'll successfully navigate the murky waters of moolah.
"If [my kids] have a problem with a charge on their phone, they must call AT&T themselves and handle it," Kathleen Thometz, a proud mother of four says. "My husband takes the time to sit with each one of the first time this happens so they're able to navigate the call. He also showed them how to smart shop on line. Imagine how proud my daughter was when she needed a replacement cell phone and found one for free and costing a penny to ship."
7. Pull Back the Curtains of Oz
Showing children where money comes from is important to do as early and often as possible. From their perspective, coinage comes from ATMs or banks the same way babies come from a stork. You may not be comfortable talking to your kids about the biology of how a mommy and a daddy merged their assets to create them, but it's vital they understand how to generate a cash flow.
"Parents tend to look at Girl Scout cookie sales or school fund raisers as a beating," offers Alexandra Allred, a mother, entrepreneur, author, and athlete, whose workout regimen while pregnant set the standard used by both the U.S. and International Olympic Committees. "They're a great way for kids to see the cost of the product, and their time pounding the pavement or selling at a stand versus what they walk away with."
8. Kids Have SquarePants
Money is an imaginary concept that doesn't exist in nature; if I were to throw the economy in your face, it'd feel a little different than, say, a rock. As MainStreet's Juliette Fairley points out, you're modeling finances for your children. Whether or not you include them in managing the family finances, they see how you handle your job, bills, and shopping. Your kids absorb the world around them like a sponge. This is why it's important to involve your kids in giving back to the community.
Melissa Groves, a professor at Towson University in Maryland, is working with leaders at the Maryland Council on Economic Education and the Maryland Coalition for Financial Literacy on a K-12 economics and personal finance program to teach kids to earn money and "help them to spend some, save some, and use some to do good in their community."
Groves stresses the importance of modeling proper behaviors in conjunction with teaching the realities of money in ways that kids can internalize. Relating how the family chooses to purchase food and other resources to the pay structure in freemium online games (games that are free to download, but offer in-game purchases) helps your child understand resource management. In addition, the MCEE website offers a listing of books, games, and other materials to assist in teaching kids about finances.
I don't know what's wrong with these kids today they don't understand the value of a dollar. Depending on their age, they may not know who George Washington is, what rent and bills are, why we have jobs or even how to count to one. Cash is the foundation of our society, but our children don't seem to have the first clue what it is, assuming it's in some way attached to fame. By understanding your own finances and finding creative ways to relate the basics to your kid, you'll have done your part in building a solid foundation for their financial future.
--Brian Penny is a former business analyst at Bank of America turned whistleblower, writer, consultant, and troll. He's a frequent contributor to The Huffington Post, Lifehack, Money Side of Life, and other outlets around the web.