STREET$MARTS
Charity Willett, Fixed Income Associate
You’ve probably read a listicle on the trendy “Things I Wish I’d Learned in High School”. Popular choices include basic finance like budgeting, how to use credit, saving and investing. While these topics may very well be valuable if taught in high school, you’ll give your kids a stronger foundation if you start them much younger. Follow these tips and they’ll be the ones teaching their high school peers all about the Benjamins.
- Let them handle cash early.
You know that crisp fiver grandma sends in your kid’s birthday card every year? Give them responsibility for it. Let them keep it in their possession, make them pay the cashier, help them count the change. My first was about five when she started handling cash; yours may be a little younger or older. It may seem too basic, but how will your kid grasp personal finance if she can’t handle cash? Of course, this may mean she leaves ten dollars in a purse somewhere between the park and the grocery store (this may or may not have happened to us), but it’s valuable experience at a time when the consequences are still relatively small.
- Resist paying the sales tax.
“I don’t have enough money for the tax; will you pay 40 cents for this?” Confession: I’ve paid the sales tax for my oldest way too many times. If she has $5 and wants to buy something that costs $4.99, it’s extremely difficult to say no. However, what is that teaching her about budgeting? Sure, 40 cents seems like nothing, but what happens to those who habitually overspend by 8%? As hard as it is, resist. She probably didn’t need that $4.99 item anyway.
- Set boundaries, sometimes.
Kids thrive on boundaries, so setting boundaries when it comes to your kid spending his own cash is vital. We all know what kids buy when left to their own devices: junk. Cheap, breakable junk. Adult brains understand that spending a few more dollars for a quality product is usually the prudent choice. When we set boundaries for our kids about what they can and cannot purchase, it introduces the concept of quality over quantity.
Do you know what really drives the concept home? Allowing them to (sometimes) make the unwise purchase. You bought that thing from the dollar spot and it broke on the way home? That’s really sad; what do you think you’ll do the next time you have money?
- Foster the art of negotiation.
In my house, we don’t do allowances, but we do have a gig economy. Generally, we name the job and name the price. If the child doesn’t think the price is right, he is encouraged to disagree and articulate why. We also maintain the right to withhold some or all payment until the job is done to our satisfaction (job must be complete, done neatly, tools put away, etc.). Again, if the child disagrees with this decision, he is encouraged to make his case. We’re going to ask questions and make him defend his argument, but we’ll always reward his boldness with a middle ground.
- Empower them in entrepreneurship.
So your kid wants to open a lemonade stand. Fun! Here’s your chance to teach them some basic business management. What kind of lemonade does she want to sell? Does she want to have a specialized product – organic? Agave? Lavender? How much does she think people are willing to pay for a glass of the icy good stuff? How will people know about her stand? Help her price out her starter materials and figure out how many glasses she needs to sell to break even. Bonus points if you arrange to loan her seed money rather than simply fund it yourself.
Which one of these are you most excited about implementing? Got another great kid-friendly finance tip? Drop it in the comments! And as always, thanks for tuning into Street$marts with H&R.
