It’s never too early (or too late) to teach your kids about money

Aneth Ng-Lim

Posted at May 20 2019 07:45 AM

As temperatures climb this summer and parents look for activities to occupy their kids, why not include money lessons here and there too?

Personal finance is unfortunately one subject not taught in most schools. Our children learn Math from how to count to the figures and shapes and how to look for X. But when it comes to growing the cash in their wallet and investing in their future, they are largely on their own. That is, unless you step in and raise them to value financial independence.

Without the financial freedom to pursue their dreams, people are crippled when it comes to making life decisions. Instead of living in a comfortable home, you end up in a cramped rented apartment in an unsafe neighborhood. From sending your children to the best schools, you settle for the ones within your budget. Much as you would like to eat healthier, your wallet dictates you buy mostly processed foods with little or no nutrients.

Studies show that the top 3 reasons most parents shy away from teaching their children about personal finance are: one, they never quite know what is an ideal age to start; two, they don’t realize that this is a subject not adequately covered in schools (because kids are taught about currency but that’s it); and three, they don’t think they know enough about the subject to teach it.

Luckily for us, there’s a great deal of resources available today to address these 3 reasons and more. You can get walk into any store and get books, or sign up and attend seminars, or just stay at home and fall into the rabbit hole that is the internet that offers many websites on the topic.

What I know about this topic I largely learned from money gurus that have made a career about teaching this subject. These "money experts" have interesting personal stories that led them down this path, including bankruptcy that forced them to become better money managers.

One personal favorite is Dave Ramsey, a best-selling author and radio commentator. In his show, he is known for raising his voice to get his message across to some 13 million weekly listeners from over 600 radio stations around the United States.

Ramsey is known for telling his listeners over and over to "get out of debt." That’s probably because he once found himself drowning in so much debt he had to file for bankruptcy. 

After completing a finance degree in college, Ramsey started a real estate business and was doing well until the market collapsed. He was left with millions of dollars of debt. He couldn’t pay it back, so he was forced to declare bankruptcy and it took him a long time to get his life back on track.

Now with an estimated net worth of $55 million, he’s clearly figured out what went wrong and made sure it won’t happen to him again. 

Ramsey constantly tells his audience to keep moving forward. In an interview with the Christian Broadcasting Network, he said: “Everybody falls, everybody. I have met …people… who are empire builders. But every one of them is a failure. They just didn’t quit. So, now people call them a success. Everybody over the age of 12 has made financial mistakes. Just don’t make the same mistake twice and don’t quit whatever you are doing.”

In his website, he shares 15 ways to teach kids of varying ages about money. Point your browser to www.daveramsey.com for a 7-minute read on how to engage children from pre-schoolers (yes, this early!) to middle schoolers to teenagers about money.

In the meantime, let me share here 5 things that should be easy to get anyone started.

#1 Sorry piggy banks, but a clear jar is a better tool to save.
 
Ramsey wrote that while a piggy bank is a great idea, it doesn’t give children a visual to see that their money is growing. With a clear jar, even you can see that the P20 peso bill they placed last week would later have additional coins for company and maybe more bills too. This way, the idea of filling up the jar becomes an urgent goal they can visually check from time to time. Best of all, this is one lesson kids of any age can appreciate. No need to spend for a piggy bank too – simply recycle any clear jar from home.

#2 They need to know that nothing is free – stuff costs money!

Ramsey advised: “You’ve got to do more than just say, “That pack of toy cars costs $5, son.” Help them grab a few dollars out of their jar, take it with them to the store, and physically hand the money to the cashier. This simple action will have more impact than a five-minute lecture.” 

Until your children gets the chance to “own money” and spend it, the idea of paying for something does not really sink in. When my younger daughter had to pay for her meal for the first time, she was surprised at how much food costs. She realized that the amounts written in the menu were not the final prices because she had to add taxes too. Knowing the limited cash she has in her wallet, she was worried it may not be enough so she could not order all the food she liked, which she would have done if her father or I were with her. I remember she came home and said, “It’s so hard to eat well within a budget!”

#3 No to allowances, instead give them “commissions”.

Ramsey scolded parents for making it so easy. “Don’t just give your kids money for breathing. Pay them commissions based on chores they do around the house like taking out the trash, cleaning their room, or mowing the grass.” Dave and his daughter Rachel Cruze talk about this in their book, Smart Money Smart Kids. According to Ramsey, this concept will help your kids better understand that money is earned, and hopefully that will make them value it so much more.

#4 Now that they have money, start them on a simple budget.

Money is a finite resource and budgets can help anyone make sure that they do not spend more than what they have. If you child has a mobile phone (as most do these days), Ramsey recommends that you get them to use budgeting Apps. “Now is the time to get your teen in the habit of budgeting their income—no matter how small It is. They should learn the importance of making a plan for their money while they’re still under your roof.”

#5 Teach your child to share.

No lesson about money is complete without talking to your kids about charity. Growing up in a Filipino-Chinese family, I started receiving ang-paos (red envelopes filled with money) from an early age. I would look forward to getting these and would think of all the ways I can spend my money. But my late father sat me down and told me there are 3 things I can do with it: save it, or spend it, or share it. And that I should make sure not to overdo one (that is save all, or spend all, or share all) but to do all three as much as I can.

Ramsey said that “once they start making a little money, be sure you teach them about giving. They can pick a church, charity or even someone they know who needs a little help. Eventually, they’ll see how giving doesn’t just affect the people they give to, but the giver as well.”

Ramsey is passionate about parents teaching their kids of any age about personal finance. He cautioned: “If you don’t teach your kids how to manage money, somebody else will. And that’s not a risk you want to take!”

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.