Any Reddit users here? The “Explain Like I’m 5” category, also known as ELI5, is super helpful for breaking down seemingly complicated concepts as if a kindergartener is following along. That’s the same method we’ll use when talking to kids about money and savings. Granted, sometimes kindergarteners don’t have the longest attention spans, so the best learning method may be doing, instead of listening or reading. Big words like “budgeting” won’t mean much at first, so it’s important to put tangible realities behind each tip. Ready? Here we go.
1. Begin with Allowance
Allowance is budgeting that kids can understand. Why? Because there’s actual money going into their hands for helping around the house. It’s a physical reality, rather than an abstract concept which may be lost of them. Allowance teaches kids that work must be done to receive an award. Money doesn’t grow on trees. It comes from people who are pleased with the results (i.e., washing the dishes or taking out the trash).
2. Introduce a Long-Term Savings Goal
Kids are always tugging on the sleeves of their parents for something shiny and new. If your kiddo has his or her eye on something, why not suggest that they save enough to make the purchase themselves? Using allowance, kids can store enough dollars in a piggy bank until the math adds up. This method may also teach kids about prioritizing which toy they want to buy first.
3. Explain Borrowing
Borrowing is a simplified version of a loan. An easy way to teach borrowing is at school when your child is paying for lunch. Let’s say a BLT sandwich at the cafeteria costs $5 but they only have $4. They’ll have to borrow a dollar from a friend—and eventually, pay that friend back. If that friend doesn’t get the money in a timely manner, he or she may not want to help next time. Borrowing teaches kids about being financially responsible and trustworthy.
4. Play Money-Themed Games
Kids love games. Playing Monopoly or Life keeps kids engaged while doing basic math in their heads. Talking about money can sometimes be uncomfortable for parents, so using games is a perfect alternate route because the instructions provide an easy-to-follow script. Payday and Cashflow are great games that simulate everyday financial situations.
5. Start Early
It’s never too early to talk to your child about savings and overall best practices when it comes to personal finance. Although it can seem like a far-fetched concept, there are ways to start small at home without having a long, sit-down talk. No one likes those. Instead, keep it casual by asking your kid for favors around the house or inviting them to grocery shop with you. These day-to-day activities not only outline finances but also stand as perfect bonding opportunities. It’s a win-win for both parent and child.