6 Lessons That Turn Kids Into Money-Savvy Adults


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Americans' money woes are well-known, but the next generation can learn to avoid such mistakes. Here are six ways to teach your kids the value of a buck.

All parents hope their children will grow up to become independent, financially savvy adults.

Fortunately, there are things you can do now to teach your children to handle money the right way. With any luck, your lessons will work so well that Junior will become rich enough to take care of you in your old age.

Following are six ways to boost your kids’ financial intelligence.

1. Encourage them to discover the hidden costs

Give your children projects that allow them to figure out the value of a dollar on their own.

Economist David Stevenson of Delaware’s Caesar Rodney Institute used this approach when his daughter wanted a trampoline. First, he had her comparison shop for different models.

Then, he had her call the insurance company to find out how much a trampoline would add to the family’s homeowners insurance costs.

After the chat with the insurance agent, she told her father, “Never mind.”

And the lesson lasted. When Stevenson’s daughter was a little older, she successfully used the research approach to show her proud father how she could afford the smartphone she wanted.

2. Teach them the value of patience

When Rod Griffin was a child, he wanted a dirt bike. It took him two years of saving, but at age 12 he achieved his goal — much to his mother’s chagrin.

Flash forward many years, and Griffin — who is now director of public education for the credit reporting agency Experian — decided to teach his own young grandchildren a lesson about the need to be patient when saving.

One day, Griffin’s grandchildren found a quarter stuffed into the seat of his car. They wanted to use it to buy ice cream. So, Griffin encouraged them to save the quarter and to continue to look for more money until they had enough for their sweet treat.

Occasionally, Grandpa hid more money in the seats. As the grandchildren found the coins, they kept track of how much they discovered until they had enough for a cone.

3. Be the Bank of Mom or Dad

In the real world, banks don’t hand out free money, and neither should you. If your children need money to buy something but don’t have enough in their allowance, let them borrow it — with interest — from you.

That way, they will learn an important lesson about the sting of carrying debt.

You can also teach them that it’s much better to be the lender than the borrower. Every now and again, borrow money from your kids and pay them back with interest.

If you borrow $5 at 10 percent interest, you will eventually pay them back $5.50. Explain that the 50 cents is like paying rent to use the money.

Don’t be surprised if they catch on really fast. Tiffany “The Budgetnista” Aliche, author of “The One-Week Budget,” says her father used this approach, and it wasn’t long before Aliche’s sister was haggling with Dad in an attempt to charge a higher interest rate.

4. Give them a credit card

Before your heart starts palpitating, understand that we are not talking about a real credit card. Instead, make up an index card that has a spending limit written on it — for example, $40.

When your child really wants something — but hasn’t saved enough in allowance to pay for it — ask him or her to use the “credit card” to get it. Again, make sure the child pays you back with interest. And as with a real credit card, make sure the interest payments continue to accumulate the longer the debt goes unpaid.

Keep a running tally on paper so it’s easy for the child to follow how the debt is stacking up.

In the meantime, don’t forget to model good behavior. Make sure your children see you paying for more things with cash.

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