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Easy Money: 21 Ways to Teach Kids About the Green Stuff

Tools to help you teach your kids about money

Sorting a mayonnaise jar of loose change into solid rolls of money, our son gets to thinking. "How much would it be," Ben wonders, "to get to Grandma and Grandpa's house if every inch were a dime?" In his mind, an odometer morphs comfortably into a slot machine; in mine, cost and distance crash together like cymbals. "Wow," I say. "I don't have the foggiest. How much do you think?" And I know what his guess will be even before he names the basic unit of currency for children everywhere: "A million dollars."

While we grown-ups fret over bank accounts and save for the college educations our children might eventually enjoy if they make it through toddlerhood without choking to death on a penny, our kids cash in on the many charms of money: as a spillable thing, sortable object, countable unit, savable commodity, and spendable wish-fulfiller.

Kids are naturally interested in money because we are, of course. And money is a handy vehicle for all kinds of exploration, both concrete and conceptual: Will a quarter stick to a magnet? (No.) Is it worth the exorbitant price to build hotels on Boardwalk and Park Place? (Yes.) Should I pass up the cupcake-flavored lip balm to save for a rock polisher? (Maybe.) What should I do with this dollar I found on the floor of the store? (What do you think you should do with it?)

But back to my son's Dr. Evil-ish one million dollars. I'm getting out the calculator, Googling "feet in a mile," helping him convert distance into cash: miles (170) into feet (x 5,280) into inches (x 12); then inches into dimes into cents (x 10) into dollars (÷ 100). When the total comes up, I actually gasp, and Ben leans over to look — "What number is that?" — then after I tell him, he says cheerfully, "Wow, I was totally wrong!" And so I must explain how unbelievably close 1,077,120 is to a million. Money doesn't grow on trees, and it can't buy me love, but as a means for teaching kids math, value, responsibility, and charity, there's a lot it can do.

How Kids Understand Money: A Timeline

Age ranges are estimates, of course. Bill Gates purportedly amassed and sorted his coins for the first time when he was 3 months old.

Birth to 1
For safety reasons babies shouldn't get their hands on actual coins just yet, of course. Still, money enters your child's awareness as a material object, removed from such abstraction as value. Its first appeal is as a shiny, forbidden thing, a glass jar of gleaming coins she can't even reach, never mind touch.

Ages 1 to 2
Next comes the fish-shaped rubber purse full of coins, which Mr. Toddles lugs around and dumps clatteringly onto the hardwood floor at dawn. "At around 12 months dumping sets in," says Claudia Quigg, an expert in child development and founder of Baby TALK. "Dumping really becomes the child's whole life."

Ages 2 to 3
After dumping comes the stacking of coins, the flinging, and then "counting," very loosely defined. Don't be surprised when your 2-year-old tries to count three cents and gets to "10" before her chubby finger stops pointing, says Quigg. "Without the concept of one-to-one correspondence" — meaning each number relates to an object — "kids are still just rattling off the names of numbers."

Ages 3 to 4
And now, the Sorting Years. "To sort, you need to conceptualize what makes things the same," says Quigg, and kids this age have the chops. Ask your preschooler if he can separate the silver coins from the copper ones. The big from the little? The ridged from the smooth? (Why nickels and pennies are bigger than dimes but worth less may be the question of American childhood.)

Ages 4 to 5
Once they've truly learned to count, kids can start to think about coins in terms of value and equivalence: a pair of dimes is 2 but also 20 cents; a quarter is 25 pennies, 5 nickels, or 2 dimes and 1 nickel (and later, one super-bouncy ball). "This understanding comes so naturally to kids who really get a chance to experiment with money," Quigg says. So bring on play scenarios involving grocery stores, restaurants, subprime mortgage lending.

Ages 5 to 6 Their understanding of basic math deepens. This has been happening all along; Barbara B. McGrath, author of a best-selling counting book, identifies money as a favorite counting tool (after candy and snacks, of course). McGrath says these "hands-on manipulatives" (developmentspeak for "stuff you can touch") are a good way to ensure an interest in math.

Ages 6 to 7 They begin to (fitfully) grasp fiscal abstraction. "Stores should just keep a bucket of money by the cash register," my son once mused. "It would make it so much easier for everyone to buy things." Concepts like how you can spend money when you don't have it, how you get it, and what it pays for are hard enough for adults to grasp — it's no surprise most children are mystified by them. Kids may be baffled that an entire box of toothpicks costs a mere 79 cents ("Didn't someone have to whittle all of those?").

Ages 7 to 8 With allowance comes deferred gratification, earned interest, and learned generosity. There may be an anthropological curiosity about money's past lives as wampum, doubloons, or salt — and questions about the gold standard or national debt (you may need to check a book out of the library). And when your kids, like kids of every era, become historians of inflation ("A Coke really cost five cents?" we asked then; "Candy bars were only 25 cents?" they ask us now) you'll feel like a dinosaur lumbering in from the past with a buffalo nickel in your claw.

Ages 9 to 10 As the complexity of mathematics multiplies, money buys your child a real-life occasion to practice new skills. "It's a fantastic way to learn about decimals and place value," says Peggy Shannon, a math professor at Greenfield Community College in Massachusetts. "But fractions are trickier. A quarter is great — it's a quarter of a dollar. Perfect. But it's a pity about the nickel. Couldn't they change that? Call it a 20th? It's not even made of nickel anymore." Still, you will likely find yourself referring your child to dollars and cents as she grapples with homework.

Ages 11 to 12 Quigg describes financial abstraction as "an ever-evolving understanding," and now the age of innocence is past. Big kids are full of hard questions about loans ("Were you kidding when you said the bank still owned most of our house?"), credit ("Why does Mom call American Express 'our plastic sugar daddy'?"), even status ("But everyone has a Prada iPod cover.") and charity ("Can't we give half our money to UNICEF?"). They may bring you to your knees, but you can't ask for more teachable moments.

3 Ways to Teach Kids to Give Back

  1. Help your child choose a charitable organization, understand what it does, and write a letter explaining who he is and why he's giving. When he gets a note back in the mail — "Thank you so much for your generous donation of $1.27 to the Children's Hospital" — he'll be thrilled.
  2. Consider giving annually (at the holidays, say) and matching your children's offering with your own contribution.
  3. At the just-for-kids website markmakers.org "shoppers" browse categories (kids in need, environment, peace and justice, animal protection, and health) to select a charity, then make donations using gift cards.

2 Classic Ways to Save

  1. Have him pick something he really wants — and make him save for it. "In an easy-come easy-go culture, the things my kids saved for were always their most prized possessions," explains Quigg, reminiscing about one son's Teenage Mutant Ninja Turtle collection (plus if he saves anything at all, your child will be ahead of the minus-1 percent savings average in this country).
  2. A passbook savings account at a local bank gives your child more than a retro place to stash her allowance: There's the concreteness of a stamped book and cash in hand, the pleasure of human interaction, the pride of spilling out change for the teller, interest earned, and delayed gratification since he can only get money during banking hours, unless for some reason you've decided he needs an ATM card. (What happens to a bank withdrawal deferred? More interest, that's what.) Your local bank may offer kids added incentives such as stickers (more stickers!) or club membership (a card on your birthday!).

3 Ways to Collect Coins

Yes, "numismatics" sounds like wheezing tires, and coin collecting may seem like a redundant hobby — hello, we're all trying to collect money here! — but it's a terrific way to cultivate interest in history, geography, math, and thrift. Your collectors might consider:

  • State quarters Now that all the states have been issued, getting your change at the supermarket is a metallic thrill of jackpot proportions. Go to usmint.gov for information about collector's maps and the program in general.
  • Foreign coins To start an informal collection, ask friends and family who've traveled abroad to fork over a yen or a peso, or if they're going on a trip, remind them to bring back some interesting specimens. Use them as currency for make-believe games. ("One corn sandwich — that'll be five shekels, please.")
  • Flat pennies You don't exactly see them on Antiques Roadshow, but flat pennies make nice trip souvenirs. For two quarters and a penny (do the math!), the tourist-spot machine cranks out a smeared cent imprinted with the image of your choice. They're cheap, they're fun, and we'd far rather slip a penny into our pocket than lug home a life-size plastic lightsaber, a stuffed ostrich, or a waving foam hand.

4 Questions About Giving an Allowance

"It's very important for kids to get a cash allowance in the Internet age," explains Janet Bodnar, author of the "Money Smart Kids" column on kiplinger.com and the book Raising Money Smart Kids. "They get a sense that money's a real thing — they can see it, feel it, touch it — and not just an abstraction." Questions to consider:

  1. When to start? First grade is the common answer, but children are really ready as soon as they understand what things cost, how a transaction works, and that a shiny quarter might not actually be better than that crumply old one-spot.
  2. How much to give? A dollar per week for every year of the child's age is one rule of thumb, but that can be much too much for younger children. Consider a reasonable thing your child might want: In 1973 a nickel could buy Wacky Packs; now you'd need 2 bucks. If you're expecting your child to save and share, increase the amount accordingly.
  3. What to expect in return? Bodnar says children should take on some agreed-upon financial responsibility with their allowance. Maybe a third to spend, a third to save, and a third to give to charity. There's also the chores question. Many families link an allowance to jobs around the house, others keep them separate. Consider the message you want to communicate: Chores are part of family teamwork and no one gets paid for them, or chores must be compensated and allowance is the payment. If you separate chores from allowance, you can always give your child an opportunity to earn extra cash doing jobs above and beyond everyday duties.
  4. What about little kids? When young children get money, Bodnar recommends keeping it in a marked envelope in your bag. Then if you're out and they want a pair of wax lips, you can grab the envelope and figure out how much they can spend without it seeming completely arbitrary. (This helps smooth the gap between a young child and an older allowance-getting sibling.)

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