Teaching Your Children About Money Lesson #1: Money is not Free
During the summer of 2009, my son William turned 4 years old. I remember that at that age, I didn’t know much about money. You basically only care about what gear you will play with for the next 20 minutes. As both my wife and I love to spend time outside during summer, we use to take a lot of walks outside with our two kids. While Amy was still in a stroller, William was able to get on his bike and go much faster. One day when we were about to leave the house, my son turned at me and said:
- Daddy, I would like to have some chips on our way back home.
- All right, but who is going to pay for those chips, William? I replied. The cashier will ask you for money.
William thought for a few seconds and then looks at me with a piece of play money:
- I can pay with this, he smiles, so proud.
- But William, this is not real money, the cashier won’t accept it. What are you going to do to get your chips?
- I will give them Amy’s (his little sister) necklace, pointing at his sister with even a bigger smile.
I started laughing and explained to him that the cashier will only real accept money and that he won’t be able to trade his sister’s necklace (unless it was a real one!). My son looked at me, thinking about his next answer and smiled back and said:
- I know who is going to pay! You will pay with your credit card so you don’t need to give the cashier money.
This is when I realized that my son understood 3 rules about money (not necessarily the ones I wished he would learn first!):
#1 You need money to pay for goods and services (okay, the first rule is good to know)
#2 If you don’t have money, you can trade something in exchange, barter (if you will) (while this doesn’t really work all the time, the most important part about this rule is that you should trade something that you own first, not your sister’s asset!)
#3 If you can’t pay, get financing. This is where I have decided to start educating my son about money. If he realizes that you can use a credit card at the age of 4, I can imagine in which kind of debt pit he will dig himself into! The very first lesson I am trying to teach my son is the following:
Money is not free. It doesn’t magically appear overnight.
Once you have found the topics you want to explain to your son, you have already made a great step into his financial education. However, teaching money lessons to a child is not that obvious. Since he won’t realize how hard things are during the upcoming years until he reaches the age of 12 and starts thinking about earning more money, I needed to find another way to show him that money is not free and that you can’t just spend it when you have it in your pocket.
I started this first financial lesson by asking him questions such as:
- Do you like your bedroom? Your toys? What you eat for supper? And your pool during summer time?
- Do you think everybody has what you have?
- Do you know why your friends at the daycare have different things than you?
Because we cannot have everything we want. We need to pay for everything we have. This is why your friends don’t have the same toys you do. This is why some of them have more toys and some other have less. It is not because their parents love them more or less than we do, it is because they all have a different amount of money to spend on toys.
- Do you know how you get money to buy things, to do activities or buy what you will eat for supper?
- Do you miss Daddy when he leaves the house before you wake and only gets home at night in time for supper?
- Do you know why he leaves the house for so long everyday?
If you like your bedroom and all you have, Daddy has to work to earn money. This is why he leaves the house so early in the morning. It is not because he doesn’t want to play with you, it is because he needs to work really hard to pay for what we have.
So he can understand a little bit more the concept of working, I tell him that his job is to go to the daycare during the day and to listen to his mother and I when we are together. It is not always fun to go to daycare (and even less interesting to listen to his parents!) but he needs to do it because it is his job, his responsibility.
Another trick to teach your child the importance of money:
For the past 2 years, we have given 2 toys to our community center just before Christmas. We ask our children to go in their playroom and select 2 toys they want to give. We also ask that they give something that is fully functional and in good shape ;-)
At first, they were somewhat surprised and didn’t really want to say good bye to Timine their teddy bear. However, we told them that not every child is fortunate enough to receive Christmas gifts because their parents don’t have enough money. We emphasize the fact that money is hard to earn and sometimes, even when we work really hard, we don’t have enough to pay for everything.
The other key point we are trying to teach them about money is to realize that they have a lot of toys, they do a lot of activities and they only eat good food. We want them to appreciate what they have and realize that not everybody enjoys the same blessings. We must be thankful for what we have and share with others.
Since we have started talking about money with our oldest child, he has started saying that he is thankful for what he has or that he really appreciated when we went bowling during the Holidays.
What about you?
Being a financial planner, teaching people about money doesn’t seem so complicated for me. However, when it comes down to my children, I find it a little bit more complex. I would be curious to hear yours tips or any money lessons you give to your children?