How honest should parents be with their children if the money situation is tight?
Children are receptive and resilient in the face of change. When speaking to children, always give an explanation of what is going on in the home or at the workplace and why money coming into the home is not as much as it was previously. Consider the child’s age and ability to cope with situations before disclosing too many details, though. Explaining to children, not intimidating them, how much money is available for food and expenses aids a child’s development. Explanations about cash flow problems will take a little time now but can pay great dividends to the adult of the future.
With more and more parents using credits cards, does the lack of tangible currency and coins confuse children?
Yes. Using cards in a limited manner is important while teaching children about money. Seeing the exchange of notes and coins when buying goods and services allows a child to see the value of these services. This action allows a child to start understanding the “value” of money. However, the “value” of goods and services varies for people. I might value a new pair of expensive shoes over buying a meal, whereas another person may want the meal and a cheaper pair of shoes! As a parent, you have to help your child attach an appropriate “value” to services and goods.
What key money concepts should parents introduce their children to at an early stage?
Earnings: Children need to understand that money is earned by parents and that when people go out to work, an employer is buying their time, experience, skills and talents and paying them in?exchange for the services provided. Children have to be taught that money does not come out of “a hole in the wall on its own”.
Expenses: Explain two headers clearly: “Must Pay” and “Money Leftover”. Break expenditure into home-running expenses and the money left over. We “must pay” rent or mortgage to be able to stay in a home. We also “must pay” for electricity and petrol, etc. We “must pay” to buy food. When there is “money leftover”, some can be saved, some invested and if possible, some put away for a treat for the family, such as a holiday or buying a new television. In my online book Will Jones’ Space Adventures & The Money Formula (available online in India at www.brilfin.com), Will’s formula for managing money covers all of the above topics.
What are the common mistakes parents make while explaining cash concepts to children?
In good times, it is assumed that the future will also be good. This does not happen, as we are now seeing. Parents must prepare their children for times when cash flow will be slow by not allowing them to spend money on non-essential goodies. They forget to explain why items such as fruits are essential buys and others like chocolates or a bag of crisps are not, especially when money is tight. Explain the goodness of fruits vis-á-vis chocolates, even though both may cost the same.
Christine Thompson-Wells is the UK-based author of the Will Jones series of books.