Instant gratification usually wins out with kids, and unfortunately with a lot of adults. But teaching the time value of money when they're young gives children tools to cope with that primal urge we all experience to "buy now."
Image via DenisNata (Shutterstock).
This post originally appeared on LearnVest.
How do you start making a connection between those trendy boots they want, and the number of weeks of their lives it would take to earn them? Let's start by playing a game.
The "What If?" Game
This is a very simple exercise in thinking about money and its time value, and one you can play over and over with your children. Just ask the question…
- What if you had $1000? What would you do with it?
- What would you do with $10,000, or even $1,000,000?
- Which charity would you choose if you had $1 million to donate?
Have your children map out a plan for each sum. What would they save? What would they buy? How much would they give to charity? Why did they choose that particular charity?
You can even keep a record of your children's answers in your family journal, and play the game again a year later to compare the results of how they'd spend their windfalls.
An Imaginary Salary
Here's another variation on the "What If" game that will teach kids about the connection between earning power and buying power: Let them figure out how long it would take to earn different amounts of money.
First, have them assume they are making $5 per hour and working 40 hours per week. Then have them assume they're earning $10 per hour, $100 per hour, etc. At each salary, how long would it take them to earn $1,000, $10,000, $100,000, etc.? Or for a real eye opener, ask your children to figure out how long it would take them to be as wealthy as Bill Gates.
"Spending" Time: How To Teach Kids Its Value
How many times have you heard, "Mum, I would have picked my clothes up off the floor and put them in the laundry, but I just didn't have the time?" This is the perfect opportunity to teach your children that time, like money, is a finite resource — it has to be budgeted too.
Just as there are fixed and variable expenses in a budget, the outlay of time can be fixed and variable too. A good way to illustrate these concepts to your children is to have them keep a log of everything they do and how much time they spend doing it for a few days.
Make a list of all the activities and the amount of time they spend on each one. (Your children can use their maths skills to determine what per cent of their total time each activity represents.) You can even split the total time they spent on each item into fixed and variable amounts. For example, hours spent at school are "fixed", but time spent at sports practice would be considered "variable". Another way to look at it is that fixed time is required, while variable time is "spare time".
- School and Homework
- TV, Computer and Phone Time (instant messaging, email, social media, video games etc.)
- Grooming and Shopping
- Sports and Extracurriculars
- Hanging out with friends
Finally, help your children decide whether they're "spending" their free time in the best ways they could be. This activity is simple: Ask them to list their favourite activity, then calculate what per cent of their total spare time they spend doing it. This will help them see ways they can make changes in how they spend the time that's up to them — a lesson we could all stand to revisit now and then.
How to Teach Kids the Time Value of Money [LearnVest]
Neale Godfrey is a #1 New York Times bestselling author of 26 books empowering children and their families to take charge of their financial lives. Neale created the topic of "kids and money" in the 1980s while she served as President of The First Women's Bank and created The First Children's Bank at FAO Schwarz in NYC. She is Chairman of Children's Financial Network, Inc. Neale serves approximately 2,000,000 children and their families through her programs. Neale is the proud mother of two children and the prouder grandmother of two grandchildren. Connect with Neale on Facebook and on Twitter.