What do you think children need to learn about the value of money? What do you wish you’d learned?

Question

I am writing a series of kids books with the intention to teach the value of money.

Yahoo! Answers Staff: This really is Suze Orman. See blog posting for more details:
http://blog.360.yahoo.com/y_answrs_team?l=16&u=20&mx=155&lmt=5

Answer 1

Empowerment and Experience!

My kids have been managing their own money since the age of 4 or 5. That is about the age that kids recognize money and some of its power. Having the freedom to make decisions with their money that they have earned has empowered them. They are confident and they make good choices with their money. They are all teens now.

We live in such a consumer driven society--it is difficult to overcome such clever marketing.

First and foremost--My husband and I believe in setting the example we hope they will become.

1. Just say NO! at the store.

We have always made them work for the money they get from us. I never subcomb to the pleadings at the store--I tell them to use thier own money.

2. Establish a saving/giving/spending plan. Make it a habbit.

We have a rule--save half, give 10%, spend the rest. When they were little, it was difficult for them to save or even learn to wait to buy something. Now saving and giving is just as important to them as spending. They each have checking accounts with debit cards as well as saving accounts or money market funds.

3. Do not bail them out of a tough situation.

It is difficult to see kids suffer disappointment, but it is an opportunity for a great lesson. My kids have lost their money and made many painful mistakes--including making impulsive purchases that feel good at the time, but is a waste of their resources; letting friends 'borrow' money--never to see it repaid.

Our theory is that we'd rather have them make mistakes now and give them a chance to learn and establish good habbits by giving them as much experience as possible.

We'd rather see our 8 year old lose his 40 dollars because of carelessness than to see our 28 year old lose 4000 dollars because of carelessness he could have learned to avoid when he was 8. Wise people tend to learn from their mistakes.

4. Teach them according to their personality.

Each kid manages money differently, but we have taught them to work with the personality they have and not put themselves in difficult situations. I have a kid that is an impulsive spender, who does not like to balance her checkbook. So she puts away money (her paycheck) in a saving account (short term savings) and investments (long term savings) first and then gives herself a set amount of cash to spend every week. Her rule is, she can spend whatever she puts in her wallet for the week on whatever she wants impusively but when the money is gone, she has to wait the next week for the next installment of money. She does not use checks or her debit card. She uses her short term savings to pay cash for more expensive items and does not touch her investments--which she will use for college. This keeps her from having to physically balance any checkbook--which she hates to do. My other kids are savers, but are very selective about what they purchase. They treat themselves to things, sometimes sharing the cost (like a computer game or book).

Our son has come a long way--losing the most money as a kid, by not keeping in a safe place or by being careless. He is so much better at managing his money and and keeping things safe. He has trained himself to put his valuable belongings in a 'home' he established. He is really a messy kid and absent minded at times. But his habbits has helped him overcome his short- comings.


5. Real world education. We are focusing on identity theft, carefully surveying offers to make wise decisions. They are consumers and use the internet frequently. My son has even been cheated on ebay--for $600. Working through the horrible 6 month process of dealing with endless voice mail, poorly informed customer service agents, red tape and law enforcement was a great lesson for him. He was very upset, thinking that he lost his money. Fortunately he was able to get it back. He will be much more careful before making purchases and he will not take shortcuts or let someone sweet talk him into a deal that sounds too good to be true!

My son owned stocks at one time through an account. We did research for several months to learn about the stock market and how it all works. He learned to follow stock prices in the news paper--another great lesson.

6. Involve them in everyday money making decisions.

Sometimes the kids do the meal planning and we give them a certain amount to use to purchase groceries. It is a good skill to read labels, compare prices and work with a set amount to purchase neccessities.

They get clothing allowances throughout the year and purchase their own clothes. If they want more expensive clothes--it is their responsibility to work and supplement the clothing allowances we give them.

My oldest daughter--who is 18--drives, but pays us money each month for the priviledge to drive and to help supplment insurance and car maintenance. She buys her own gas and takes care of oil changes. We really do not need her money, but we want to get her in the habbit of always setting money aside for the 'not so fun' things we need.



7. Make them bear the burden of waste and mistakes.

When my kids waste milk or forget to turn off a light or have an overdue libray book--they have to use their own money to pay to replace the item or service or pay the fine. My son lost the paperwork for a rebate, so he had to pay us the money we would have gotten for the rebate. If they forget their sac lunch--they pay to eat in the school cafeteria.



8. Teach them to value their work.

My son does many odd jobs and he has had to learn to negociate for fair prices for the jobs he performs. That is difficult for a kid who is just excited about getting a job.
We feel that we have to give our children as much experience and education as possible.

9. Teach them how to lend money to others--or to say no when people ask.

We tell our kids that if they can afford to live without the money forever, then it is okay to 'lend' money. It is inevitable that people will ask to borrow money. Getting the money back is another thing. We try to teach them to help trustworthy people and to try to stay away from lending altogether.

This money education is an ongoing process because they still make some mistakes. We even make a few mistakes from time to time. However, they have really come a long way and they are doing very well.

We have one shot for a short amount of time to arm them with what they will need to reach their potential.

Answer 2

I think they need to learn that the people who spend the most are not the richest. They might actually be the poorest. And they need to know that cash from the ATM isn't just free money. I've heard my young grandchildren say that someone must be rich because they buy so many things. They don't have any concept of credit cards yet.

I wish I'd learned the value of long term saving at an earlier age. I had my first job in 1974. I did save on a regular basis, but then I'd use it for a trip or a new coat. I didn't start saving money that I wouldn't touch until I was almost 40. And it doesn't matter if it's a very small amount at first. Any savings is better than none.

Also if you make a practice of being cost conscious the savings will add up in the long run. Using a coupon to save a dollar on toilet tissue or buying things when they're on sale might not seem like much, but in the long run you'll have more wealth. Or in the case of children, more candy.

Young children will not be able to understand 401K matched by an employer, but there might be a way to introduce the concept. I'm always amazed been when someone doesn't take advantage of this. One of the few times, if not the only, that you'll get free money.

I don't know how to get this across to children, but I hope you can. I'll buy a book for my grandchildren.

Answer 3

Here lies the problem, more often these days the parents use some chores equals allowance routine. Well this sounds great right, you work and get compensation. However, money is a cycle the above example is missing one part, which does not conclude the cycle. Parents often times allow the children to spend the allowance shamelessly or save it. This is still not completing the money cycle. Required expenditures is what is really needed. Usually allowances are less then what it would cost to actually hire a maid, the reason is there is a trade off involved. The lower allowance plus taking care of the children everyday needs. The other extreme is no allowance but a roof over their head. The valve of money is lost in such a instance. If the parents allot more allowance then have all parts of the cycle included the value of money will be addressed. For example, the child earns $100 a week for chores, however with that money required needs must be paid, such as room and board. Which is lets say $75, that leaves $25 that must be budgeted for other expenditures and fun. With this the cycle is complete and the child understands budgeting for the necessities.

Answer 4

So, Suze is writing a book based upon the ideas of others? Will procedes benefit a children's program or will it go to Suze's pocket? It does not seem right to ask of the people for their knowledge, wisdom and insight if there is not a solid plan (i.e. a social contract) that all stake holders will benefit from this book.

However, if everyone answers the question and then there's Suze on Oprah with "her" new book and a multi-million dollar deal then what about those who contributed to the book? What about the good souls who provided the ideas? Where is there compensation?

Economics and teaching kids about money is not that difficult. Supply side economics can be taught through a lemonaid stand. Competition and demand shifts when the kid down the street has purple lemonaid for a nickle more and two blocks away someone else has the same lemonaid but it is ten cents cheaper.

If Suze writes out a social contract for those who contribute ideas then this is a fair deal. However, if you want to teach children about money first we start with How much Suze can make from this book and then the choices she will have to make with the money she has- how will she spend it and why does she make particular decision.

So, Suze, what's in it for the kids? What do the great people submitting ideas to you get from it? What will you get? What will you return?

Answer 5

I think it is a great idea to teach our children the value of money. The way that they are growing up in a very materialistic world, begs for some advice! We have 2 kids(5&4), and they already get an allowance, $5 e/o Saturday. We talked with them about it first and have them put half in their savings account and the other they can spend on what they want. We also have told them that if they save their $ they can buy something big. They know that the savings account is for college, wedding or first house. We also have shown them the value of a buck at a garage sale or thrift store. We also have taught them to repect what they have and other people's belongings, b/c people have to work hard for what they have, that way they understand that nothing is given without earning. I know it may seem like a big concept to children their age, but they get it, and I think all kids would if given the opportunity. I am a stay-at-home Mom and they see me make the $ stretch and cut coupons and bargain shop. I feel they should see this and that way they will understand $ issues when they get older. My husband is in the Air Force so we don't "struggle" per say, but we both are very frugle people, which is a quality I would hope they aquire. I was taught the same values, but didn't really live by them until the kids came. I wish my parents would have stressed the savings part, but I happy with what I did take away. I am very excited about the upcoming books and can not wait to get them for our kids(and us).

Answer 6

Well the only way a child will learn the calue of money is there parents. I would say to start you would want to write for younger children 7-10. Talk about allowances and making kids work for what they get. Open a savings account and let them look at there bank statement every month to see how much money in interest they made.

Then as they grow older you should probably talk about credit and check books. Teaching a child to balance a checkbook and so on. Then you can teach your child a lesson about credit cards by letting them borrow money and actually making them pay it back with interest (like a credit card company would do) in the end you can show the child how much more they have paid you for the item then they would have if they would have just waited.

Then when the child is in the early teens play a little game with them. Teaching about stocks and bonds by having the child choose there shocks/bonds and having them tell you how they are doing. This will teach them the stock market isnt a sure way to make money and only put extra money into it when they are an adult. Then when a child gets a job have them make a budget, of how much to save, spend, how much should go to a college fund and a car fund. keep a tab on how much the child has spent vs. saved and hwo the saved money has been used. Show it to them at the end of the year and ask them if they would rahter have all the money or the item(s) they spent it on.

This would seems a little silly to some people but i honestly think the only way to teach a child is to let them make mistakes and this way they are making these mistakes in a controlled environment

Answer 7

What I learned growing up about the value of money wasn't intentional by my parents. I just observed and remember well the good times and bad times. I am now 27 years old and have learned to manage my money through the good and the bad times. Here are a few things I think are really important.
1.Know where your money has gone, I can tell you how almost every penny is spent, and at the end of the month I can break it down to see if I spent to much on entertainment, going out to eat, and things like that so I don't follow the same pattern the next month. I always make sure that the money coming in is more than that what is going out.
2.I have in savings approximately 4-6months income to live off of in case I lose my job. After I have that nest egg of savings I pay off my other debts faster.
3.Don't buy things you can't afford. Meaning don't go into debt because you really want that new truck. Buy something a little used that you can afford. There is such thing as good debt and bad debt. A house and reasonable transportation are good debt.
4.Don't ever say or think "It's just ten dollars" or "It's just 5 dollars" at the end of the month if you said that $10 to $20 times that just ten dollars was actually $100 to $200

Answer 8

The way that they are growing up in a very materialistic world, begs for some advice! We have 2 kids(5&4), and they already get an allowance, $5 e/o Saturday. We talked with them about it first and have them put half in their savings account and the other they can spend on what they want. We also have told them that if they save their $ they can buy something big. They know that the savings account is for college, wedding or first house. We also have shown them the value of a buck at a garage sale or thrift store. We also have taught them to repect what they have and other people's belongings, b/c people have to work hard for what they have, that way they understand that nothing is given without earning. I know it may seem like a big concept to children their age, but they get it, and I think all kids would if given the opportunity. I am a stay-at-home Mom and they see me make the $ stretch and cut coupons and bargain shop. I feel they should see this and that way they will understand $ issues when they get older. My husband is in the Air Force so we don't "struggle" per say, but we both are very frugle people, which is a quality I would hope they aquire. I was taught the same values, but didn't really live by them until the kids came. I wish my parents would have stressed the savings part, but I happy with what I did take away. I am very excited about the upcoming books and can not wait to get them for our kids(and us).

Answer 9

The single most important thing to teach children about money, which everyone ought to wish they learned as a kid is The Time Value of Money. I work with young adults who still don't understand what saving early means in the long run and do not contribute to their 401k plans despite my explaining that a cheaper car or a few less clothing purchases today can mean a real retirement for tomorrow. The earlier a child learns this, the more likely it is that they will understand when the time comes to make savings decisions. Watching a small savings account grow through regular deposits and interest should be a requirement for all children. Every time a child is given birthday or holiday cash gifts, a portion should be required to go into their account. Very simple.

Answer 10

Children need to save on a regular basis. I have taught my sons that they should save 75% of their paycheck while they are living at home. This way they learn to live on a budget and they have to wait to buy the items they really want. They can work more hours or wait until they have enough money to buy something. Most of the time they realize that what they want they can do without. I think alot of the instant gratification that our children experience is our own fault. We just give in and stay yes to everything because we did not want our kids to be left out or we might look like the "poor" parent when in fact we really are full of debt and we go spend even more. Lately, I say NO. They still love me and now they ask if I want them to pay for some things, like the cell phone or the gas. Today my kids have more assets than I have except for my house. Today they can put a down payment on a small house and they are not allowed to have a credit card balance. Credit cards are only used as a emergency card. Cash must pass through your fingers to feel how much you are buying. Suze, I am so proud of you and proud to say you are my idol. The girls at work call me "Miss----Orman" I always tell them what you would say. Three of them have been debt free for about a year. Thanks and God Bless you and your work. Good Luck, nurseinsi P.S. My boys are 21 and 19.

Answer 11

My parents were very good about impressing upon me about the need to get a part time job during school, while emphasizing I could not let my marks fall (ie successful multi-tasking). This also let me understand the value of a dollar as well as the importance of education so I wasn't trapped in a minimum wage job for the rest of my life.

What I wished my parents had been more explicit about was saving part of that money every pay check (pay yourself first for that rainy day)... I never really got that lesson until my mid 30s - fortunately I'm making good coin now and can /am resolving that behavior. However, I've seen too many other of my age bracket depend on credit cards instead of savings and investments.

The other thing I wished was that there was a mandatory financial planning class in high school (much like civics). This would at least teach imperical facts about money to children and give them a chance to learn before heading off to college and the rest of their adult lives.

thanks Suze - the book is a great idea!