Wise financial management doesn’t come naturally to most people. To most, it’s a learned behavior that is developed over time as we learn to consider future financial obligations, delay gratification and learn patience. As adults, sometimes wise financial management comes naturally and sometimes it hits us as reality slaps in the face. There’s no denying, however, that managing our money wisely is a necessary skill to function in our financial lives.
What if we were able to begin teaching children the basics of money management from their earliest years? Would they grow up as ‘natural savers’ and have an easier time managing their money throughout their lives? The kid experts at Sesame Street think so.
Sesame Street, in conjunction with PNC Bank, has created a campaign to help children learn to save money, called, “For Me, For You, For Later,” promising to instruct children on first steps to spending, sharing and saving. The campaign includes a video chronicling the adventures of Elmo as he learns to make good choices with his money. It also includes resources for parents and educators to help reinforce the lessons. In the video, Elmo implements the simplest of savings strategies: Three jars which hold money for one specified purpose each, including spending, sharing and saving. These are firm footings on which to start explaining and demonstrating the concepts of money management to children.
Whether you utilize the Sesame Street system or one of your own, these are the concepts for teaching financial responsibility from a young age:
- Money is a representation of value. Help children to think of money as a tool which can be amassed to obtain other things. Children should learn that money’s value correlates to something concrete. For example, $1.00 is how much a bucket of sidewalk chalk costs. Give money meaning or a child will not comprehend the correlation between the abstract concept of a ‘dollar’ and anything in her own life.
- What you do with money is a choice like any other. Money brings with it particular responsibility. Since it can be spent or shared or saved, help children to learn the reasons for and importance of doing all those things with their money. If they think of it only as a spendable resource, they won’t learn it’s true power.
- Money can only be spent once. Children need to learn that money is not automatically renewable — when it’s gone, it’s gone. Help them to realize that when they spend a dollar on an ice cream cone, they no longer have that dollar for a toy car.
- Saving is adding, spending is subtracting. Money represents a perfect opportunity to teach about addition of subtraction. Saving adds to your money, spending subtracts from it.
- Saving is a goal, short and long term. Once children understand that not spending enables them to hold on to money, you can use the opportunity to help them decide how to make saving goals for things they identify they want. This is a sure way to help them embrace the idea that the choices they make with money impact their ability to afford things they want.
These simple lessons will help children begin to understand the complexities of money — the ins and outs of managing resources, to gain and maintain control of their finances, right from the outset. It may be a good idea to step back and see how these simple lessons relate to the way we deal with money as adults in our day to day lives.
Can we learn to be better money managers by getting back to the basics?
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Great concepts for introducing money to young children. I really like that you mentioned learning to make choices and that once a dollar is spent, it is gone. I firmly believe that kids need to practice with money while they are young and the consequences are minor. They can learn as much from a bad decision with their money as they can from a good decision with their money. I think the key is for parents to have natural, everyday conversations with their children about money and let the kids have control over some portion of they have earned.
As they get older, teaching kids to keep track of and manage their own money allows them to set goals and become responsible money managers.