How to Talk to Your Kids About Money
Introduction – Talking Money with Family
Discussing money with children can be a challenging yet essential aspect of parenting, especially for high-net-worth families. Cultivating financial literacy from a young age not only fosters responsible money management but also prepares them to handle future wealth responsibly. In this post, we’ll explore effective ways to talk to your kids about money, ensuring they grasp its value and develop the skills needed for financial independence.
What Does Wealth Mean to You?
Before diving into financial education, it’s crucial to reflect on your family’s values regarding wealth. Share your personal experiences, beliefs, and the importance of financial responsibility with your children. This foundational understanding will help them perceive money not just as a means of purchasing goods but as a tool for achieving long-term goals and contributing to society.
Key Questions to Consider:
- How do we define wealth in our family?
- What values do we want to instill in our children regarding money?
- How can we use our financial resources to make a positive impact?
Meet Them Where They’re At
Children’s understanding of money evolves as they grow, so it’s vital to tailor your approach based on their age and cognitive development. Start with basic concepts for younger children and gradually introduce more complex topics as they mature[1].
Age-Appropriate Financial Concepts:
[1] Based on Raising Financially Fit Kids by Jolene Godfrey (2nd ed., Ten Speed Press, Berkeley CA, 2003, 2013).
The Art of Teaching
Teaching kids about money goes beyond lectures; it involves active and experiential learning. Use real-life scenarios, interactive activities, and discussions to make financial education engaging and relatable.
Strategies for Effective Teaching:
- Storytelling: Share anecdotes from your own financial journey.
- Role-Playing: Create scenarios for children to make financial decisions.
- Games: Use board games like Monopoly or apps designed to teach financial concepts.
- Hands-On Activities: Involve them in budgeting for a family outing or saving for a desired toy.
Bloom’s Taxonomy: A Framework for Financial Learning
Bloom’s Taxonomy provides a structured approach for teaching and assessing learning objectives. This framework can be incredibly useful when discussing financial literacy with children.
The theory suggests that learning is an active process and stresses the importance of using verbs in learning to constructively assess and observe progress.
The Levels of Bloom’s Taxonomy:
1. Remembering: Recognize and recall basic financial terms and concepts.
2. Understanding: Explain the importance of saving, spending, and budgeting.
3. Applying: Use knowledge to make simple financial decisions.
4. Analyzing: Compare different financial options and understand the consequences.
5. Evaluating: Assess the implications of financial decisions and strategies.
6. Creating: Develop a personal financial plan or investment strategy.
By aligning your teaching methods with these levels, you can ensure a comprehensive and effective financial education for your children.
Case Study: Joey and The Air Jordans
To illustrate how you can use Bloom’s Taxonomy to teach kids basic financial skills, let’s look at the example of Joey, a 9-year-old who wants to buy a pair of Air Jordans.
Scenario:
Joey is beginning to express his style but feels self-conscious because he wants to fit in with his peers. The cool kids at school have multiple pairs of Air Jordans, and Joey has been begging his mom to buy him a pair. While Patty Parent is sympathetic, she wants Joey to understand the cost and the effort required to earn money.
Teaching Plan:
For a 9-year-old like Joey, the objective is to apply some basic money skills to buy the Air Jordans. Patty decides to cover half the cost if Joey earns the other half through chores.
1) Remembering:
Joey identifies the brand and model of the shoes and recalls their importance among his peers.
2) Understanding:
Joey learns that the shoes cost $150 and calculates that he needs $75 to pay half.
3) Applying:
Joey reviews the list of chores and their respective payments:
- Clean the pool: $25
- Wash the dishes after dinner: $10
- Take care of the dog for a day: $20
- Help mom make dinner and set the table: $20
- Wash and fold his own laundry: $15
4) Analyzing:
Joey compares the chores and decides on the quickest way to earn the money. He chooses to clean the pool, take care of the dog, help make dinner, and wash dishes, aiming to complete all tasks in one day.
5) Evaluating:
Joey assesses whether he can realistically complete these chores within the day and ensures he understands the effort required.
6) Creating:
Joey successfully plans his day around completing the chores and earns the $75 needed, then purchases the Air Jordans with his savings.
Outcomes:
Patty’s approach not only teaches Joey about the cost of items but also instills a sense of responsibility and the value of hard work. By guiding Joey through the various levels of Bloom’s Taxonomy, she helps him build a solid foundation of financial skills.
Wrapping it Up
Teaching your children about money is an ongoing process that requires patience, creativity, and a willingness to engage in meaningful conversations. By aligning your approach with your family’s values, meeting your children at their developmental stage, using engaging teaching methods, and leveraging frameworks like Bloom’s Taxonomy, you can equip them with the financial skills needed to navigate their future confidently.
Remember, the goal is not just to impart knowledge but to foster a healthy relationship with money that will serve them well throughout their lives. Start today, and watch your children grow into financially savvy individuals ready to take on the world.