Money can be a complex issue to understand. You need to know how to save it, how to earn it, how to spend it, how to invest it, and how to borrow it — a lot is going on in that seemingly simple word. One fun way to find out how your kids think about money, and more importantly, how they understand the value of money, is to ask them how they would spend $1 million. Remember to keep three things in mind when having this conversation: perspective, priorities, and practice.
Your kids may not grasp how large a sum of $1 million is. Their answers to how they would spend it will likely vary from the expected, like buying a bunch of candy, to the fantastical idea of purchasing a theme park. Once they’ve shared how they would spend it, ask them how much they think things cost. By starting with the smallest items they mention and teaching them the true cost, you can help them understand the value of a dollar.
Now that you know how they would spend $1 million and you’ve explained what things cost, ask them to choose the things that are most important that fit within that budget. Or, ask them to choose between having some smaller items now or saving the money for the bigger items they really want. It will help kids understand that money is not endless. They will have to make choices about what to spend their money on and introduce the concept of saving for something they really want.
As the saying goes, practice makes perfect. Include your kids in everyday money moments, like grocery shopping. Let them help plan out the list and explain how much items cost and what your budget is. If there are a few special items or money left over in the budget, let them choose what they could add or choose between things to practice prioritizing. Over time, they’ll understand the concept of money and then relate it to the other big-money concepts, like saving and budgeting.
Using this fun, imaginative exercise, you can begin having healthy conversations with your child about money and help them grasp the four fundamentals of financial health: spending, saving, borrowing, and planning. If you’re looking for more helpful financial tips and tools to better plan, spend, save, and borrow, check out PlanU by UFCU. You’ll find options from talking with a financial health expert to creating a personalized resource center to meet your needs.