It’s the holiday season, and you know what that means! Cookies and holiday lights, for sure, but it also means that many kids will receive gifts of cash and gift cards. Receiving “spendable” gifts offers the opportunity to teach kids about money management, budgeting and the value of a dollar.
It’s never too early to start building financial literacy skills. As part of the Girl Scout cookie program, girls begin learning about money management starting at 5 years old. By the time they are in high school, Girl Scouts have completed a detailed financial literacy program that teaches about goal setting, various aspects of running a business and the trade-offs required for meeting long- and short-term financial goals.
Learning how to identify different denominations of money and how to count change is a great place to start with the youngest kids. Most parents can remember a time when they, or their kids, thought a nickel was worth more than a dime because of its larger size. Bigger isn’t always better, is it?
Basic math skills, such as adding up the costs of four or five things on a grocery list is another task that can help younger kids see how far a budget can (or can’t) go. Taking your child on a shopping trip and engaging them in a conversation about how much things cost and comparison shopping builds a sense of how much things cost. Knowing that broccoli is $2.99 a pound won’t ensure that they’ll clean their plate, but financial awareness is worthwhile anyway.
For the Girl Scout Brownie Money Manager badge, girls learn how much it costs to buy things like groceries and school supplies and have fun learning how to manage money. They also learn how much fun outings such as movies cost (don’t forget the cost of the popcorn!) and compare those costs with items on the grocery list. How far does your money go? How can you stretch your budget? Talk about life skills!
To build money management sense in young kids, try setting a budget of $10 and see how many items your child can purchase from your shopping list with that amount. For most kids, it’s a real eye-opener, particularly if it’s their own money.
Once kids have a general understanding of how much things cost, they can begin to learn the distinction between essential items and luxury items. Being able to compare “wants” and “needs” is an important part of money management. You can start by taking the time to look at the purchases you make as a family, asking aloud, “does this count as a ‘want’ or a ‘need’?”
Identifying whether something qualifies as a want or need is a key skill, particularly when kids have money or gift cards in their possession. The impulse to shop and spend as soon as they receive a “spendable” gift can be somewhat mitigated by engaging in a planning session. Asking “What do you want to buy?” “how much does it cost?” and “how can you save enough to buy it?” are all valuable pre-shopping exercises.
By the time kids are tweens, they should be able to set a goal and write out a plan. Research shows that writing down goals is an important step in actually achieving those goals. What is the payoff for practicing restraint at the register? If there is a goal in mind, it’s easier to wait for something they have their heart set on. Encourage your child to set realistic goals, and nudge them toward making the necessary decisions that will help them be successful.
Parents are an excellent resource for helping kids and teenagers keep track of their financial goals. Many banks have savings account programs for children. You’ll be amazed at how much fun it can be for your child to watch his or her savings grow. If they receive an allowance, they can deposit it directly into their account instead of letting it “burn a hole in their pocket.”
Having their own money is a great way to reinforce financial decision-making. A recent study by the Girl Scout Research Institute showed that 94 percent of girls want to make their own money instead of relying on their parents. Financial education is key to ensuring these money makers are also fiscally responsible.
Check out the Girl Scout Research Institute’s Having It All: Girls and Financial Literacy study for more stats, tips, and research on what it takes to empower the future drivers of our economy.
