The Shriver Report – 10 Things Your Kids Need to Know About Money

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10 Things Your Kids Need to Know About Money

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By Audrey Henderson

Back in the old days, people learned to be satisfied with what they had and to save for a rainy day. The ongoing financial crisis is teaching us some of those lessons all over again.

However, the world today is not quite the same as it was back in the day. For instance, debt has complicated the finances of more people than ever with the advent of easy credit and skyrocketing education costs.

Along with the valuable lessons passed on by my parents’ and grandparents’ generation—remember, a penny saved is a penny earned—here are 10 new lessons that I taught my kids about money that will serve them for years to come.

1. Very Few Things in Life Are Free

Even if your family is financially well-off, you are doing your kids a disservice if you spoil them. Instant gratification almost never happens in the real world.

I’ve made a point to teach my kids the valuable lesson that most items cost money, and that the money to buy things must be earned.

2. A Penny Saved Can Translate Into Dollars

If your child begins to save just $100 every year beginning at age 14, by the time he or she reaches age 65, those savings will have multiplied to reach $23,185*, assuming a steady rate of 5 percent interest each year.

If your child waits until age 35 to start saving $100 annually, he or she will only have $6,976* by age 65, assuming the same 5 percent annual interest rate.

The sooner your child understands how compound interest works, the more money he or she could potentially save—painlessly.

3. Nip Bad Financial Habits in The Bud

I don’t want to turn my kids into misers, but standing by without commenting while they blow $30 on a video game that is only played once will never make me the “cool” parent.

Once your child grows up, and that $30 balloons into hundreds, he or she could find it impossible to pay their rent or a car note. Then what will they do? Probably turn to you for help.

Fix bad habits before they do permanent damage.

4. Credit Cards Are Not Play Money

Credit Cards—They’re plastic. They’re colorful. You can get cool things with them—even when you’re broke!

No wonder so many people treat credit cards like Monopoly money. But when the bills come in with ever-escalating numbers, credit card debt starts to get real.

It’s important to teach your kids that credit cards are actually plastic loans that must be repaid to help them avoid credit card debt as adults.

5. Money Does Not Grow on Trees

Unless you have a trust fund or inherited wealth, you almost certainly must work to earn your money. Your kids are not too young to learn the same lesson. I help my kids learn this lesson by paying them a dollar or two for helping to take dinner dishes from the table to the kitchen so they can see their productivity in action. Teens can do more “work-like” tasks like taking out the trash or mowing the lawn in exchange for their allowance.

6. Penny Wise Can Be Pound Foolish

Think about it this way. I would never recommend overlooking business cards while job hunting, just to save a few dollars, no matter how tight your budget is. Imagine if a critical contact expresses interest in keeping in touch, while you are forced to scribble down your details on a scrap of paper. You’ll look less than impressive.

Likewise, it’s important to tell your kids about about the expenses that are good for business. It’s not necessary to skimp on everything.

7. Distinguish Between Wants and Needs

We need food. My kids may want an X-Box, but unless they’re planning on becoming game programmers when they grow up, they really don’t need one.

Teach your kids to take care of needs first, and they will be more likely to have money to pay for their wants.

8. If It Sounds Too Good to Be True, It Probably Is

It slices! It dices! It peels off pounds without dieting! Products that make outrageous claims nearly always fail to live up to the hype.

Watch a few toy commercials together—they’ll always show a Barbie actually driving, or an action figure that really flies. Explain that while it looks cool, it isn’t real, and that they should regard such claims with a generous helping of salt.

9. Money Cannot Buy Happiness (or Friends)

If you watch many popular TV shows or movies, you may get the impression that if only you had more money, you would be happier and more popular. Of course, in your saner moments, you know that this is simply not true.

Be sure your kids know this also, that money doesn’t equal happiness.

10. Save, Cut and Earn Before You Borrow

Nearly everyone gets into a financial jam now and then. Payday loan companies may create the impression that quick money is the solution.

I’ve been teaching my kids that it is almost always better to cut back on expenses or try to earn extra money before resorting to borrowing money from me. Quick money is never a long-term solution.

*These numbers were verified by CFP Brittney Castro, founder of Financially Wise Women.

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user-avatar-pic 2Audrey Henderson is a Chicago-based independent writing and research consultant specializing in sustainability, popular culture and the arts, travel, mental health issues, interpersonal relationships and business. You can find her work on