Real-life Context Helps Kids Grasp Money Concepts

Most financial experts will concur that financial education should begin at home, taught by parents to their children starting at an early age and ongoing through young adulthood. But what are the best ways for parents to help their kids gain money smarts? In the following article, several financial professionals describe how grounding financial lessons in real-life situations brings the message home.

Ben Cook is the co-creator of Clever Tykes, a series of UK children’s storybooks promoting enterprising behavior in children. “For me, the role of parents should be helping children understand how money works in real life and to give some context,” says Cook. For example, “explaining how one gets paid from a company, organization or the government and then how that money is spent, saved or invested will help children understand budgeting, planning, taxation and salaries.” As a mother and user experience designer, Lisa Mollica of the practical educational tool KidCash was looking for best practices to teach her children important life lessons. Mollica comments, “I knew I needed a tool to do this, and so I created KidCash. It gives them the first hand experience that really immerses them into the learnings I want to give.”

Daphne Mallory, Family Business Expert and entrepreneur, suggests that parents use project-based learning to provide both financial and entrepreneurship education. “The best way to learn is within the context of real life examples,” she explains. “You really don’t retain financial education from books. You have to implement what you learn in order to make it stick. Find projects in your home, business and community activities for your children to take over. Don’t make the projects all about finances, but look for ways for them to work out financial principles while completing projects.” Paying bills might form one useful example parents can teach, according to Jordan Niefeld, CPA, CFP® at Raymond James & Associates in Aventura, Florida.

Niefeld recommends, “Parents should sit with their child in a non-distracting setting and discuss the overall nature of budgeting their monthly allowance and ensuring that the child pays any bills they may incur on time. Go over the type of expenses the money should be used for and allocated to.” Niefeld then suggests teaching kids that they can use any money left over for their own rainy-day fund or a larger goal down the road. “This way they may not feel compelled to spend ALL the money,” says Niefeld, “They will feel part of the PLAN.”

“If parents don’t teach their kids about money, who will?” asks Adam Dailey of Ludus Sports in Austin, Texas: “Money is something that is simple and straightforward. It’s the complications of money are what make life difficult.” Parents do have ultimate responsibility for their children’s personal finance training, believes Brad Sherman, President of Sherman Wealth Management LLC in Gaithersburg, Maryland. “In the U.S. very few schools, or other educational organizations make teaching personal finance a priority, and most do not spend any time on the subject at all,” Sherman comments. “This is unfortunate because each child will eventually have to deal with their own personal finances as they get older.” Sherman advocates for parents to begin learning about personal finance by speaking with financial professionals, reading books on the subject, or through other mediums of information (financial education online resources), and then teach their children what they learn through simple analogies and stories.

Annalee Leonard, Founder & President of Mainstay Financial Group, offers further support for using real-life experiences to teach kids about money. “A trip to the grocery store is a great time to talk about price comparison, value and inflation,” Leonard says. “This is where discipline comes in – if the child doesn’t have enough money to purchase an item, don’t cave in and buy it for them. Too many people today have the philosophy that if you want it, just get it – no matter how much debt is created.” ATM withdrawals and bill-paying provide more teachable moments, describes Leonard: “Make it a point to tell your kids that money does not come from a machine… Allow your kids to be a part of bill-paying…talk about payment for services, debt and interest. Show them the math and how it works – if you don’t, they think the ‘tooth fairy’ is paying the bill.”

Money management is a huge part of an individual’s life, and even small children are capable of understanding these important lessons when they’re grounded in real-world context.


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