Kids learn early, so teach good financial sense

This was originally published on Monday, November 3, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I have three kids ranging from elementary through high school. I would like to start teaching my children about the value of money. Do you have any suggestions?

Answer: Children learn early about money even when we don’t teach them directly. A 5-year-old watches money exchanged at the grocery store, a dinner paid with a credit card, or a parent getting money out of an ATM. Financial education should start early and at home. Children who learn how to be financially literate grow up into adults that are more responsible with money.

Unfortunately, many parents avoid talking to their children about money. Parents feel that they have to be financially stable to teach it. That thought cannot be further from the truth.

If your finances are less than desirable, work with your children in getting your finances back on track and set an example. Just like any other challenging topic, if you don’t teach it to them, someone else will.

We live in the age of instant gratification. How many times have we gone into a store to buy an item and were talked into buying a toy or candy? Kids at a very early age should be taught that “money does not grow on trees or come out of a machine.”

Teach a young child that going into a store does not always mean that you are there to buy something. Once a child learns that you must save to be able to purchase an item, they will start to instinctively become more conservative with money.

Have a young child set a goal to buy a small toy. Create a savings jar and once they have reached their goal take them to purchase it. This will show the importance of saving money.

Around 6 years old, begin teaching needs versus wants and how money should be spent on needs first. Needs are necessary to live, wants are things that we would like to have. Knowing the difference between the two will help them spend money more wisely. While shopping, explain if an item is a need or want. When purchasing a more expensive item, explain how long you saved for it. Get kids involved in some of the financial decisions. The grocery store is the best place to learn about price comparison and saving. Looking out for the Kmart and Cost-U-Less ads and using them while shopping is also a great educational tool for learning the value of money.

Once kids get into middle school, introduce them to compound interest. Explain how it works favorably in a savings account but causes you to pay more for an item on a credit card. Teach them about long-term financial goals. Explain that what they give up today, will eventually pay off tomorrow.

For example, if your child has a routine to stop at a store after school every day and spend $5 on a snack, educate them that if they were to cut back to buying a snack twice a week, they might have enough money in a month or two to purchase those expensive sneakers they have been wanting. This is a good age to get them to start putting money aside, not only for savings but for a rainy day emergency fund.

Kids in high school and college have more wants and bigger responsibilities. Get high schoolers interested in the stock market. They might even want to start investing some their savings. Help create a budget. Include cost of dances, yearbooks and fuel. Parents can open up a pre-paid debit/credit card to help them stay on budget.

They will soon learn to make wise spending choices once they understand that the money isn’t infinite. Sit down with college students and help them look for a low-interest-rate credit card. Explain that the card should be used for emergency purposes only and not on everyday items. Emphasize not to spend more than they can pay off next month.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

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