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More Thoughts On Teaching Financial Responsibility

Our reliance on representations of money rather than “cold, hard cash” and “green backs” makes understanding money more difficult. When a child has coins and currency, she has something tangible, a concrete way of experiencing money. She can count and explore how different coins combine to equal specific values. A quarter is worth 25 pennies, five nickels or two dimes and one nickel. Other combinations are also possible, and whatever coins she puts together to equal a quarter, the value remains constant. Twenty-five cents is 25 cents.

Exploring different coins and combinations that equal one dollar further enhances her understanding of money and mathematics. Handling physical coins and currency allows a child to explore the impact of her decisions. Say the child has five dollars and is ruminating on what she wants to do with the money. Saving is one choice, spending another, choosing to save some and spend some is yet another.

Counting out what the child will be spending to purchase what she wants leads to making more thoughtful choices. Weighing immediate gratification against a later one helps children hone their understanding of the connections between spending and saving, now and later. Learning to distinguish wants from needs and how to save and spend wisely are key to learning financial responsibility. For children – and adults who relate to the old lament “how can I be overdrawn? I still have checks” – the concrete trumps the abstract. Ultimately, the concrete becomes abstract for most of us, and we embrace the conveniences of contemporary banking. The key to that transition is knowing – truly knowing – that behind every financial decision we make are “real” coins and currency.

PlayopolisToys – for the diverse needs of the citizens of play

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More On Teaching Financial Responsibility

My parents separated chores and allowance. Everyone was expected to work, and each of us had assigned tasks for which we were responsible. Completing those was mandatory, and work came before play.

We also received allowances. To teach us to manage our income, we had expenses to pay. Whatever was left, we could choose to spend or save.

Our parents opened savings accounts when we were born for depositing gifts of money we received until we were old enough to make our own decisions about what to do with monetary gifts. Saving was their preferred, but not only choice.

Once we reached high school, we were given checking accounts and made responsible for specific expenses. Our parents funded the accounts annually to cover those expenses and provide discretionary funds. We were expected to live within our budgets, and to do that we had to understand the difference between needs and wants. Cost of living adjustments occurred yearly, as circumstances dictated.

When time came for college, the practice continued, and I enjoyed knowing that I had money to take care of my needs. By contrast, many classmates had no experience in “handling money.” Whenever they needed or wanted something, they had to ask their parents for money. They missed out on opportunities to weigh options, make choices, and experience the consequences of decisions made – all invaluable lessons for emerging adults. Others, of course, seemed to have unlimited funds and, therefore, never learned about balancing budgets or planning ahead.

Learning to manage personal finances from childhood is crucial to a successful transition into adulthood. Whatever our financial situation, the more knowledge and experience we gain as we’re growing up, the better.

However we choose to do so, we must make time to teach and model healthy attitudes towards work, play, and money. Children are not born knowing how to earn, spend, and save. Instant gratification is the norm for children. Every want is a need until they learn to distinguish the difference. Let’s commit ourselves to acquiring the tools and teaching our children how to be fiscally responsible. They – and we – will be glad we did.

PlayopolisToys – for the diverse needs of the citizens of play