Before College: Teaching Small Children About Money

Our children will leave for college in what seems like the blink of an eye, and among the things we need to teach them is how to work with money. There are many parts to this, of course – the nuts and bolts of day to day spending like remembering sales tax (for little ones) and keeping tabs on their bank balance (for older ones) — but how do broader concepts like debt and savings fit into it?

I believe that experience is the best teacher, and so from the time that they are quite young, it can be good to give kids the opportunity to experience both debt and saving. The key thing is to let them explore, because that is how they can learn.

How does an 8 year old learn about debt? The most likely scenario is that she will borrow some money from a sibling or friend, and then have to figure out paying it back. Some children can be quite disciplined and get it taken care of, others will find it more painful, or simply forget and need to be reminded. Either way, the important part is to not rescue them from having the experience and learning from it. It can be very interesting to see how our own issues can get triggered when our children are working through a situation, so if you feel uncomfortable, or have an urge to jump in and rescue, take a good look at that before you act!

Saving is another challenge. Teach them to save a portion of their allowance or earnings for the long term. (You can define how “long” that is – in my family we made it after they finished college.) This can be difficult. Most children will want to spend their money now; in fact, one could argue that most adults feel the same way! So be patient, but hold to it. When our sons had high school jobs we required them to save half of their earnings, and with the younger one it was easily a three-month period of daily pushback before he settled in!

The relationship between debt and savings is important. By practicing, children can learn how we build up savings, so that when they are away at college they will be able to run their finances from a cash-based rather than a debt-based approach – in other words, save up money before they buy something, rather than buy it first and then have to figure out how to pay for it. This takes patience and maturity to set up, but it will decrease both their stress and their financial vulnerability once they are at school and managing their own finances.

About Linda Matthew . . .

Today’s guest author is Linda Matthew, Accredited Financial Counselor® and owner of MoneyMindful Personal Financial Coaching, with which College Affordability Solutions has partnered since 2016. Linda has clients throughout the U.S. and Canada. She is also the parent of one college graduate and one current college student.

Linda’s new book, Teach Your Children About Money, describes age-appropriate methods for helping youngsters learn about themselves and different ways to manage their money. It also has a special section just for college.

Go to the MoneyMindful website for more about Linda, to arrange a free consultation and to order your copy of Teach Your Children About Money.

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