Gather Little by Little

As you have, no doubt, already read, I am trying to teach my 4 year old son lessons about money. It is hard to teach them everything about money at this age, but I can tell you that children can learn a lot more than we think! It’s only a matter of repeating clear and easy to understand concepts. In fact, most personal finance concepts are pretty easy to understand and this is why I am trying to teach them to my son at this tender age.

By starting his financial education so young, I just hope he won’t have to struggle with credit card debt or having trouble plugging his income and expenses into a budget. I hope that if he understands the true value of money before he starts earning it, he will be more careful and make the best financial decisions for himself.

Today’s money lesson is about the limited power of money. While I have described all the good money can bring in one’s life during the second money lesson, money can also be a weapon of massi destruction when it is not respected or properly controlled. This is why I want to talk about sacrifice.

Think that you can afford just about everything because you have easy access to credit, Whoa! This will only last so long. This is why it is so important to understand how to fit your lifestyle within your budget. But how do you teach a child to stay within a budget? You can do it with practical examples.

Daddy has to go to work this morning

My son sometimes tells me that he misses me when I go to work all day. He doesn’t like when I come home late (about once every two weeks). As I mentioned in my first post about teaching money lessons to children, I explained to him that this is the price to pay in order to live in our house, do activities and play with so many toys!

I tell him that while my job is to go to the bank every morning, his is to listen to his mother and behave like a big boy. This is his job and this is how he participates at his young age in our household. I tell him that I need to leave the house to earn an income during the day so he can play soccer and skate on the weekends, so we can all go on vacations and to afford ordering out dinner on Friday evenings. I am trying to show him that by making sacrifices, he is also rewarded.

You can only have one toy at the store

When you go to a toy store with a kid, it’s like Christmas each and every time! My son starts out by looking at all the toys with his sparkling wide-eyes and he keeps saying “Hey dad! Look at this one! This is cooooool!”. But I one point, I tell him he can chose only one. He usually asks why and I explain that with the money I have in my pocket, I can buy one toy, pay for the gas and pay for groceries (so the family can eat).

Then, I offer him the choice of walking 3 hours to get home, not eating or having only one toy. Luckily for me, he has never picked the first two options ;-)

If you wait long enough, we will be able to pay for it

My son has been asking for a Wii for about 18 months. He played at a friend’s house when he was 3 and since then, he “really” wants one. I told him that a Wii is very expensive. But instead of telling him that we can’t afford it, I told him that we have to wait several months so we can buy one.

So month after month, I told him that we were putting money aside so we can buy the Wii and play. We ended-up buying the console for Christmas. While Santa Clause brought him the Wii, we told him that we used the money we put aside to buy the video games. Each time that we have a big purchase (like going on vacation once a year), we tell him that we put money aside each month in order to get by after a large purchase.

The limited concept of money possibilities

I think that the most important thing to learn about money is that while it can help you achieve great projects, you are always limited by what you have in your pockets. Overspending or taking for granted that you will earn more money later on to pay off a debt is not the best way (contrary to many).

Sacrifices and planning your expenses ahead of time is a much healthier way to plan your personal finances. In the end, I just hope that my son realizes that. If I take the time to explain to him how many months we have to save before we can afford specific purchases, I hope he’ll do the same in the future!

Author: Mike.