"If we don¹t learn as much as we can about money
and investing when we are young we will have
a much tougher time when we are older."
Now imagine that 50 of the kids are told they have to wear 30 pound backpacks for the race and big heavy boots to go along with it. How do you think those 50 are going to fare? Every parent of the “backpack kids” would complain that the process was grossly unfair; none of their kids would even have a chance at placing in the top 50. The burden for them would simply be too great and they would automatically be destined for all of the worst jobs. It would be over before it started.
Such is the case with today’s kids who start the journey into adulthood with no meaningful knowledge of money and investing. They will always be racing from behind and will have a tough time ever breaking into the winner’s circle.
So what to do? Here are some suggestions for how to incorporate financial a education into a child’s everyday life without making a big deal out of it.
- Engage with your kids and speak to them about money. While most parents are not experts on financial issues it doesn’t matter. Parents know more about money than they may think and they certainly know more than their kids do. Take the time to share what you know and your kids will learn something from you every day.
- Get over the notion that talking about money, investing and the stock market will make kids too money obsessed. It won’t. It will help them. It is never too early to get a good education and the benefits of a good financial education will help them in ways they cannot even imagine at a young age.
- Make the learning fun. For example, whenever the bill comes at a restaurant, play “guess the check.” Have everyone guess what they think the bill is going to be before taking a look at it and then congratulate the winner. Kids love competition and they will soon be anxious to beat their parents and their siblings at this little game. In the process, they will be developing a real appreciation for what things cost.
- Once the restaurant bill has been disclosed, tell them you want to leave a tip of between 10% - 20% depending on how good the service was. Have them rate the service, decide on the percentage and then have them calculate the amount in their head. It is a great little math exercise where they will quickly learn to calculate 10% of a bill (just move the decimal point one place to the left) and 20% of a bill (double the 10% amount) and then pick the ballpark number in between for the agreed upon tip. (15% would be the mid-point; 17% a little more than the mid-point, etc.) The spirit of competition will keep them interested and sharp and they will become increasingly comfortable with everyday math.
- When they pass storefront signs that advertise 40% off “today only,” ask them what the price would be for something that normally costs $100? Or $150, etc. It gets them thinking about money and how to quickly do simple financial calculations on the fly.
- Open a small trading account at an online brokerage firm for your teenager to manage. Fund it with whatever you can afford and tell your child that he/she will get to keep half the profits. For example, if the account is funded with $4,000, tell your child they can buy any 4 stocks they want to buy but they have to give you a reason for buying each one before the purchase is made. That will force them to start thinking about why they want to buy a particular stock rather than just picking something out of thin air. Once that is done, they will have to calculate how many shares of each stock they can buy with $1,000. At $15 a share, how many shares can they buy with $1,000? At $110 a share, how many shares can they buy with $1,000? Finally, show them how to buy the stocks online through the account you have funded. Thereafter, encourage them to check the account regularly to see how they are doing. When the time comes that they want to buy another stock, no more money from mom and dad. They will quickly understand that they will have to sell something to raise the cash to buy a new stock. The concept of “fully invested” will suddenly mean something to them.
- Take them to one of the currency exchange booths at the airport and have them convert some U.S. dollars into the currency of another country. It is a great way to get an appreciation for the relative value of different currencies. Have them study the pictures and writing on the foreign currency so that they can learn about it and see how it differs from our money and money from other countries.
- Start a foreign currency notebook. Arrange the notebook by country and have them go online, print out a map of each country and place the map in the notebook next to the currency from that country. It is a great way to learn about foreign currencies and world geography.
- Take them with you to buy groceries. Have them guess what the total cost of the goods in the shopping cart will be and then see how close they come to the actual number. While there, have them swipe your credit card at the checkout line. They will quickly learn how that system works and how you have to sign when the transaction is completed.
- Review your credit card statement with your kids. Show them where the line item is for the grocery store transaction that they signed for so that they understand the relationship between signing at the store and having to pay for the purchase later on.
- Give them a dollar bill and a magnifying glass. Tell them they are official “money detectives” and they need to study every detail of what is on the bill. When they are done, ask them questions about what they observed. Do the same thing with other denominations as well and ask them why they think there are differences between the denominations. Give them a $100 bill and ask them how many times “United States of America” appears on the front of the bill. Most people say “two,” but there are at least three. Can you find the third?
These are just some of the suggestions for what can be done to introduce kids to the world of money and investing on an everyday basis. Come up with your own ideas and share them with us by emailing firstname.lastname@example.org. We will post some of them on the website.