Children and Money--Part #2--Introducing the Terminology

Children learn about the world around them in many ways: they listen to what is being said in a variety of circumstances and coming from a variety of sources and they observe what is going on. But the vocabulary that they need to make sense of their world and surroundings is often not there or is imperfectly understood. In the same way that schools and parents patiently teach other types of vocabulary, parents need to teach the vocabulary of money and finances.

Young kids have a vague idea of what money is and where it comes from. They may understand that mom and dad work and that brings in money, but they do not necessarily see money as a finite substance. For most kids, all their needs and a lot of their wants are being met by their parents. They are fed and clothed and put to sleep in beds in homes with solid roofs and with heating or cooling. Their school supplies are purchased. They go on school field trips. Most frum kids attend yeshivas. They go to their friends' birthday parties and they go carrying a gift for the celebrant. They get Chanukah presents. They get birthday presents. In their minds money shows up, is spent and replaces itself.

Any conversation with young kids should start out with defining terms. Money needs to be defined as something that is earned in some way and that is limited rather than infinite. The idea of budgeting** can be introduced, as well as the idea of wants and needs. Certainly the term "savings" should be introduced and defined.

**A package of cookies can work as a tool in teaching budgeting. Take 4 children* and a package of cookies containing 32 cookies. Have some sandwich bags handy. Now, announce to the children that the package of cookies is the only package that will be available for the week. Viewed as an unopened package at the beginning of the week it sure looks like a lot of cookies. Now open the package and start dividing it equally among the children. Point out that each child will get 8 cookies for the week. Suddenly that package of cookies is starting to look smaller, but still, 8 cookies is a lot of cookies. Now start talking about how those 8 cookies are going to be eaten during the week. Inevitably there is going to be one child that says he/she wants to eat all the cookies today. Put the 8 cookies into a bag and place it in front of the child. Other of the children may be able to reason out that they would like a cookie every day. Place one cookie into each of 7 bags and give those bags to the child. Point out that there will be one cookie left over. What does the child want to do with that cookie? You can point out that the child could have one day that week where he/she gets 2 cookies instead of one, where one of the bags has two cookies in it. You could also point out that the child could put that cookie away in a separate bag and save it for the future.

There is going to be a child who looks at one cookie in the bag and says "One cookie is not enough for a snack." Fine. Ask how many cookies would be enough for a snack. Say the child says "two cookies." Put two cookies into each of 4 bags and place in front of the child. Have the child count the bags. Point out that there will only be 4 days during the week when the child can have cookies if they are divided this way. Another child may say "three cookies." Place three cookies in each of two bags and two cookies in a third bag. Point out that by dividing the cookies this way there will be only two days when the child can have three cookies and a third day when only 2 cookies will be available. Now put 4 cookies into each of two bags. Point out that if someone wants to eat 4 cookies there will only be two days that cookies will be available.

Keep in mind that some children will opt for more cookies but for less days, and some will opt for less cookies but for more days. Either choice is fine as long as everyone understands that this is all the cookies that are going to be available. Inevitably at least one child is going to say "Just buy more cookies." This is where you explain that only one package of cookies has been budgeted for. If you double the cookies for the week you will have to take away something else that has been budgeted for for that week. If they want more cookies what are they willing to give up in order to get those cookies?

Now take out a large bag of pretzel sticks. Point out that the bag of pretzel sticks costs the same as the package of cookies, and there is only one bag of pretzels budgeted for for the week. Have the children help you to divide the pretzel sticks into 4 even piles. (The bag I divided had 151 sticks in it.) Each child will have 37 sticks, with 3 left over. Divide those sticks further and each child will have 7 piles of 5 pretzels each with two left over. Point out that those two extra pretzels could be added to one or two of the piles or they could be put together with the 3 leftover sticks and put into "savings." If the extras are put into "savings" there will be 11 pretzels in the savings bag.

Now, have the kids look at the bags of pretzels and the bags of cookies. If they want one of each type of snack each day then they are going to be limited to 5 pretzels and one cookie each day with very little put into savings. If they alternate the cookies and pretzels, with two cookies three times during the week and six pretzels four times during the week they are going to be able to save two cookies each week and thirteen pretzels each week, with a savings of 8 cookies and 52 pretzels across the four kids. Now point out that their "savings" for the month will be 32 cookies, or a whole package of cookies, and 208 pretzels or 1-1/3 bags of pretzels. By dividing their cookies and pretzels in this way they not only get both snacks each week but they also save money the second month because they don't have to buy pretzels and cookies again because they already have the items. What could be done with the saved money? You might also point out that if they opt for only one snack item each week instead of two the same savings could be realized.

Depending on the age of the children, you could also introduce the idea of "unexpected expenses." What if the kids have company at some point during the week and want to offer their guests some cookies or pretzels? How are the cookies and pretzels going to be divided to cover the "day to day" cookie and pretzel expenses of each child while still covering the guests? How might savings help here? Or what--gasp!--if mom or dad want some cookies or pretzels?

So, budgeting is what you do so that both what you need and what you may want can be purchased. Budgeting says that there is only so much that can be spent and makes sure that spending covers all items, even if some items may not be seen as frequently as other items. Budgeting is thinking about money before it is spent.

*Note: Obviously if you have more or less than four children, how the cookies and pretzels get divided will be different, and will definitely impinge on how much can be eaten and how much can be saved. And this, too, should be pointed out as part of the budgeting lesson.