Donna Smith of Rensselaer found herself in a pickle one day when she and her three kids were on a shopping trip.
“My children begged for a very expensive electronic toy,” Smith says.
This was not that unusual from most shopping trips with her 7-, 6- and 3-year-old kids. Similar to most children this age, her kids were under the impression that money grows on trees.
“My three children want everything. Kids today want iPads … computers. I have three kids now, so three iPads, that’s about $1,500 right there,” she says.
Smith, who runs a preschool and sleeps with a pen and paper under her pillow in case a good idea comes to mind, decided she wanted to write a book for children to help teach financial responsibility.
“I felt I needed to explain to them the value of money and do it early on so they could carry the lessons,” Smith says.
Her children’s picture book, “The Money Tree,” is a story about a boy named Tyler who had everything a kid would want – a jungle gym in the backyard, videogames in his car and a flying bumble bee plane. Yet, his bumble bee wasn’t good enough. Tyler’s friends had a bigger and better bumble bee plane. When his parents refuse to buy the new toy and his attempt to grow money fails, Tyler learns that the best way to “grow” his money is in the bank.
Smith says “The Money Tree” explains basic financial concepts and practices in plain and easy-to-understand language that children can comprehend and use in their day-to-day lives.
Smith’s eagerness to teach kids these lessons led her to become a certified financial educator.
“I wanted to be able to go out to schools and talk to kids,” she says.
Smith says that it’s a parent’s job to teach their children about financial responsibility, but often this doesn’t happen.
Make it fun
One of the first lessons, she says, is to help kids distinguish between a need and a want. At Smith’s preschool, she teaches this by keeping it fun and entertaining.
“What I do is have little pictures of different things and make it funny. We have pictures of some huge underwear just to make it interesting. Underwear is something everyone needs,” she says.
Teach how to spend
Smith says a lot of the problem lies in not so much how to save, but more about how to spend.
“A lot of times we teach them to save, but also need to teach them to be good spenders,” she says.
Smith also explains a game she plays with the kids called “Bistro Day,” where she uses play money for kids to purchase their lunch.
“A lot say they want to save the rest of their money instead to buy a snack,” she says.
Smith suggests creating three jars labeled “saving,” “spending” and “sharing.” When a child receives money, have them divide the money equally among the jars.
“The kids can decorate the jars,” she says. “This makes them feel good about saving because they had a part in coming up with the jars.”
Smith says it’s important for them to know the consequences of spending money and how to make wise choices.
“Children as young as 3 years old can grasp financial concepts like saving and spending,” she says. “Money lessons at this age can set the tone for later on.”
Smith says it’s natural for kids to see something a friend has and want it, but talking early about needs and wants won’t have such a big impact on them later. She adds that simply teaching kids how to be patient can be beneficial to them. In today’s instant gratification world, kids are always longing for the newer and better items. Lining up days early for a newer generation iPhone with a perfectly good working iPhone in the back pocket is a normal occurrence.
“Kids at this age need to learn that if they really want something, they should wait and save to buy it,” Smith says.
Be a good role model
Being a role model with money is often a tough one for some parents parents. After all, who is the one buying the new iPhone?
“Be a good financial role model and let children know that money is real,” Smith says. “A lot of the time we just get money from an ATM, and kids think it’s just coming from out of a hole in wall. Kids see parents spend money, but they don’t see them save or budget or pay bills.”
Smith says it’s important to show your children that you understand the value of money. A large number of people in the U.S. have hiked up the balances on their credit cards, but this isn’t an excuse not to teach proper financial responsibility to children. In fact, it’s a perfect way to show kids how to work out a budget.
According to a survey by T. Rowe Price (2014 Parents, Kids & Money Survey), 69 percent of parents are very/extremely concerned about setting a good financial example for their kids, but 74 percent admit they are reluctant to approach the topic because they don’t want their kids to worry.
Smith says she will actually sit her kids down and look at the bills together.
“I don’t place my financial burden on them, but we talk about electricity and our needs and this is where our money needs to go,” she says.
Smith says often parents will need support, and this is why she launched her financial literacy program called START or savings today and riches tomorrow for kids in kindergarten through fifth grade. The START program addresses financial literacy by using “The Money Tree” as a way to connect the dots. The program collaborates with schools and banks to introduce banking concepts to young children with fun and interactive workshops.
“We let the kids take on alter egos,” Smith says. “They will have jobs and have to budget the money they make. I put them in groups, and they need to budget their money to pay their bills for the month.”
Smith says the interactive activities keep kids engaged and interested.
“We will have small trinkets, and I give them play money. This lets the kids make wise financial decisions or not. A lot of them decide to spend all their money on the table. I then bring out another set of trinkets, and only those who have money left can buy them,” she says.
Smith says that originally “The Money Tree” was written as a stand-alone storybook, but the success she has had with her children and those children from her preschool has inspired her to create a series of stories explaining financial concepts in more depth. Smith says the series will cover topics such as budgeting, earning, investing and the consequences of good and bad money decision making.
“Knowing how to spend and save money is an important part of learning how to be a responsible adult,” Smith says. “The sooner a child learns to budget and save, the more financially prepared he or she will be in the future.”
“The Money Tree” is available on amazon.com.
www.moneyasyougrow.org – Offers age-appropriate money lessons for children
kids.usa.gov/money – Learn, play games and watch videos about saving money
pbskids.org/itsmylife/money – Teaches ways to earn, manage and spend money
bizkids.com – Kids teach kids about money
zefty.com – Online virtual bank account for kids that teaches them how the world of banking operates
www.sesamestreet.org/parents/topicsandactivities/toolkits/save – Sesame Street gives lessons on spending, sharing and saving.
“The Berenstain Bears’ Trouble with Money,” by Stan and Jan Berenstain. To earn coins for the Astro Bear video game, Brother and Sister Bear find ways to work for money. (Ages 3 to 7)
“The Berenstain Bears’ Dollars and Sense,” by Stan and Jan Berenstain. Brother and Sister Bear know some things about money. They know that money can be used to buy things like baseball cards, ice cream, candy, and balloons. What they don’t know is how to manage their allowances. (Ages 3 to 7)
“The Money We’ll Save,” by Brock Cole. A family has to get creative about keeping costs down, including raising a turkey in their home. (Ages 4 to 8)
“Fancy Nancy and the Fabulous Fashion Boutique,” by Jane O’Connor. Fancy Nancy, figures out how to earn money