Teaching kids about money isn't as complicated, or as difficult as we sometimes think. Kids can absorb incredibly complex ideas - think about the arcane rules of some of the computer games they play, for example!
You can break money ideas down into simple words, and use examples from everyday life.
When our girls started a rat-breeding business, they were paying interest on their start-up loan out of their pocket money. (The full story is at Cash-Smart Kids) Two of them wanted to pay back the money faster by repaying principal as well as paying interest, and one didn't. When you are teaching kids about money, situations like this are an opportunity to demonstrate money concepts.
We discussed the possibilities, and they all agreed that the one who didn't want to pay extra could become an employee instead of a business owner. This gave them the chance to explore the differences between owning a business and having a job.
Every time the cages were cleaned, the employee was paid $2, whether there was profit or not. But then, when there was profit to be distributed, the other two would get $20 or $30 each, and the employee would get nothing.
We explained as we went why things were different for owners compared with employees, and they all understood that it was fair. Even at age nine or ten, they could grasp the principles - the owner takes risk and does work for free now in the hopes of a big reward later, while the employee gets paid every time they work, but doesn't get to share the profits.
We compared each situation in their little enterprise with full-sized businesses they knew, so they understood that this is exactly what happens in the adult world.
Opportunities for teaching kids about money are everywhere. Accounting for their allowance money, attending a garage sale, buying a new sofa, and managing their cell phone expenditure can all provide important lessons.
By Jenny Ford
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