Money Management for Kids

Shane Barkley sees these teaching opportunities a little differently than most. While the monetary concepts are important, the author of “Dad Cents” explains that money management for children really starts with teaching them about positive character traits.

“The character we show in how we utilize money is same throughout all the rest of our life so the cool thing is when you teach kids about money, you’re teaching them about life,” he says. If a man isn’t faithful, he says, how long do you think he will have a job? If a man isn’t trustworthy, how can he be trusted with a credit card or a computer?
Parents can help establish these traits by guiding their children in accomplishing tasks. When a child performs jobs for neighbors, such as mowing the lawn or shoveling snow, a parent should check on them and help them determine when the job is complete and if it has been done well, Barkley says. This will help the child understand what it takes to be faithful, trustworthy and accountable.

Teaching character traits applies to other aspects of life, including academics, he adds. But, for it to work, the teaching must be intentional, Barkley says. Parents cannot rely on the “learn by example” method alone for teaching kids how to spend wisely. “It can’t just be kids watching. We give as many bad examples as good examples,” he says.

A parent’s first step, though, is solidifying his own understanding of financial concepts. Barkley says it is fine if parents find they don’t understand everything about personal finance and must learn alongside their kids.

One crucial concept for kids to understand is the difference between needs and wants, Barkley says. Lines between the two become easily blurred. Barkley suggests having daily conversations with your kids on the topic of wants vs. needs. When they use the words “want” and “need” question them on why they chose that word. Challenge them on whether something truly is a need or a want.

Barkley advises teaching kids that if you are more efficient with your money, then you have more money to do fun things. By eating at home rather than at a restaurant, there might be more money to do something more fun later.
Two ideas can help with understanding needs and wants, Barkley says:

Opportunity costs: Children can learn the impact of money by examining opportunity costs. Show them what they are giving up by the choices they make. As an example, tell them they have $10 and they can either go to a movie, get gas for the car, or eat at McDonald’s. Examine their choices and the ramifications. 

Concept of scarcity: When you have to limit what you buy, needs vs. wants becomes terribly important, Barkley says.  Say, for example, that the child wants a $100 pair of shoes. Ask them what they would do if they spent $50 on shoes and had $50 left over.  Once kids get older, actually give them the money to spend.

“Kids make better choices when money is in their hands,” Barkley says.