Money Talk: The national debt and your kids

What does the national debt mean for our kids? Here’s a startling statistic: The lifetime share of our national debt for a two-year-old is estimated at $1,487,787. That means that this generation will have to be millionaires-and-a-half just to keep up with Uncle Sam!

The national debt is not going away quietly, so what can parents do to help put this in perspective for our kids. You can start a dialog in your home to help your kids understand that government and personal choices about money have long-lasting effects. As you talk with your kids you also help them see the responsibility each of us has as citizens.

Here are some thoughts to get you started talking about debt with your kids.

What is debt?

  • Kids can see tangible possessions but don’t know that money may have been borrowed to buy the item. Likewise, kids don’t know that debt is like a bill that needs to be paid. Buying a house is a great example of how a decision to get something results in a promise to pay the borrowed money back over time.

What does debt do?

  • Obviously, making personal loan payments uses part of one’s monthly income and reduces the amount of money available for other spending. Car payments are a good example of how a regular payment is treated like a bill having to be paid every month.

What about the national debt?

  • This is a frequent news topic. Explain that the government also “borrows” money to pay its expenses creating the debt. However, be sure your kids understand that the money the government is spending comes from the taxes you pay, local, state, and federal.

What can people do about the national debt?

  • Vote. Find out how candidates stand on financial issues and vote. The people who get elected will be spending your tax dollars.
  • Contact elected officials. Local, state, and federal government officials need to know what you think about budget issues. Show up at local government and school board budget hearings to show your interest.

What can your family do about personal debt?
Involve your kids in your spending decisions and explain your rationale for making some of the choices you do. Perhaps this year your family votes to take a less expensive vacation, or to forego buying a new car. Be prepared as a family (and as citizens) to accept the consequences of some tough choices.

Prepare your kids to be responsible managers of their own money.
Children who learn to manage money early will be better prepared to survive in an uncertain financial future. Parents who help their children learn money management through hands-on practice at home provide kids an essential life skill.

The No-Cash Allowance is a reliable, repeatable and realistic method to learn money management skills at home. Children from pre-school through high school can practice concepts of debit card, ATMs, electronic transfers and credit transactions using their own money. Examples of dialogue between parent and child create a picture of real life situations. Charts, tables and illustrations show how to set-up and let children track all their money in their own accounts. Kids see the “big picture” view of their money and learn that each decision affects the balance, a reality that will be constant throughout their lives.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school. 

Money matters: Kids walk away without getting change

Do your kids know that they can get change when purchasing with cash? Maybe, maybe not. Consider this comment from a parent,  “While leading a book fair at my children’s school, most of the children purchased books, but walked away without getting change.”  Really?

Here are my three reasons why don’t kids know that you can (and should) get money back when you give a cashier cash that adds up to more than the purchase price.

  1. Kids don’t see cash in action as much anymore. They see swiping and writing.
  2. Credit cards, debit cards, and checks are more commonly used to make purchases. No change. Nothing but a paper receipt with numbers on it.
  3. Kids don’t know that at purchase time it’s all about the numbers. If the cash tendered equals a larger number than the purchase number the difference is returned to the buyer.

This all adds up to the reality that today’s kids don’t know how cash works.

Here are three things parents can do to help their kids understand how cash works. Hands-on experience with cash introduces and reinforces counting and math skills in a real-world seeing that makes sense to children. Doing activities with real money provides pattern recognition and makes math relevant to their daily lives.

Activity: Penny Exchange

For each child include a cash supply that includes the following: 100 pennies, twenty nickels, ten dimes, four quarters, a one dollar bill and a one dollar coin. (Half-dollar or 50 cent coins are still in use. You may mention this to your kids; it isn’t a coin they will see very often.)

Instructions: Have your child exchange pennies from the cash box for other coins. Start with nickels, then use dimes, quarters, dollar coin, and dollar bill.

Repeat the Penny Exchange until your child can accurately tell you how much each coin is worth in pennies. When your child has mastered this activity he will be able to say,

“Five pennies is the same as a nickel. Ten pennies is the same as a dime. Twenty-five pennies is the same as a quarter. One hundred pennies is the same as a dollar.”

For more money activities, see my book, The No-Cash Allowance.

Money Talk:  Shopping with cash

“This shirt cost $15.00. If I use a $20.00 dollar bill that amount is more than the cost of the shirt. The clerk will give me $5.00 in change.”

Show your child the cash you give the clerk and the change you receive. You can also point out these numbers on the printed receipt.

Hands-on practice: Play Store

Give your child a $5.00 bill to purchase a book that costs $4.50. Pretend you are the clerk and have your child ask you if they will get change or not.

Your child might say, “This book cost $4.50. If I give a $5.00 bill how much change will I get?”

As the clerk you would reply, “You will get $.50 in change.”

Reinforce this by writing the numbers on a piece of paper like a receipt to show the math.

$5.00 (cash) – $4.50 (purchase price) = .50 (change)

By doing some show and tell with money and numbers you help your child understand how money works. Not only are you and your child having the money talk, your child is also learning how to talk about money with other people.

Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.