Today I had the pleasure of meeting with the students at Setauket Elementary School.  I am always impressed with how quickly they can grasp the concept of handling money responsibly, if they are shown the way.  The trouble is, as parents, we are pulled in many directions (as are our children) and  there is always something more fun, exciting or urgent for us to do rather than have a “money lesson.”  But the lessons are all around us, every single day.  If we spend a few minutes to point out some things to our children, they will be the wiser for it.

I proposed to the children that learning about money is like learning to ride a bike.  You can read about it in a book, but ultimately you need to just do it.  In my opinion, the most important step in learning about money is earning it.  At first, the students were a little confused by my opinion, but slowly it dawned on them that money earned is treated differently because a sacrifice of time is involved.  As I pointed out, losing $50 that was a gift is very different from losing $50 earned from 5 hours of shoveling snow.

“Skin in the game” gives kids the stake they need to care long enough to not act impulsively.  If your child wants something desperately (as it is always a desperate emergency) and you tell them they need to contribute to the purchase (or buy it outright) you will find out very quickly just how important this item truly is.

“My money?  Well forget it, then.”  Be prepared to hear this, and often.  If they are determined to earn the money, encourage the effort, but delay the purchase of the item until they have earned it.  Why?  Delayed gratification is an important step in handling money.  Delaying gratification is how savings accumulate;  impulses wait; and cooler heads prevail.

This summer, my husband took this one step further.  Our sons received some gift money that they were prepared to use on sneakers.  I thought $75 was too much to spend, but they were determined to use their own funds.  Tony tempted them with the idea that they should look at buying the stock of the manufacturer of the sneakers or the stock of a company that profits from the sales of these shoes.  If they did the necessary research to make a case for investing in the stock, he would add $25 to their $75 and buy $100 worth of shares for them.  One son jumped all over it and eagerly put together a pros and cons list of why the company may be profitable going forward.  Eventually, our other son didn’t like the idea that his brother would have $100 invested and he would have yet another pair of sneakers that he would soon outgrow.

The next time your child asks you to buy something for the heck of it — take a minute of time not to just buy it, or to quickly snap “No!”; but rather allow your child to earn it or contribute towards the purchase (or purchase an investment instead, and watch it grow).  You will show them that earning things requires sacrifice, if they are up to the task.