Kids and money — developing financial understanding by learning the vocabulary of money
Many parents try to explain to their child the current economic situation, but find the words get in the way, literally. In order to explain anything there must be a commonly understood vocabulary. And therein lies the challenge.
The first challenge is the number of words related to the economy and financial matters, not counting all the acronyms like FDIC and APR. The English language contains hundreds of word and phrases related to financial matters. The next challenge is that many of these words describe sophisticated concepts which are difficult to explain and are not widely understood in the first place (For example, how many of us can rattle off an explanation for capitalization?).
In either case, developing a child’s vocabulary of financial terms is critical to their future understanding of financial management and assessing the impact of economic situations on their personal financial situation. Here are ways to develop a child’s financial vocabulary.
All the news that is news. Use the news stories as a starting point for exploring new vocabulary. Pick a word from the news story and ask your child what it means. If they do not know, spend some time researching the word in the dictionary or on the internet. Have them write the word down in their “financial terms” notebook with its definition. An alternative to a notebook is a system of index cards which are then sorted alphabetically and kept in a small file box. Have the child decorate the box with items symbolic of money (coins, the sign for the dollar, cent, British pound, and so on).
Bedtime stories. One fun way to introduce the topic of money is to read books which offer a starting point for a discussion about money. Financial situations are so fundamental to the daily life of human beings that many books deal with or have an undercurrent of economic themes. Rags to riches, the struggle of the poor, the standard of living enjoyed by the characters, are all themes which can be used as a jumping off point for a discussion about money. Talk about the experiences of the book characters. What might they have been able to do differently? Did their actions change anything for them? What worked? What did not? Look for books which offer worksheets either in the book itself or through the publisher’s website.
Dinner conversations. Another time of day which works well for discussion is when you are sitting around the dinner table. Make it one of the house rules that each person comes to the dinner table with a topic for discussion. Talk about what you read in the paper. If the DOW dropped, talk about what the DOW is, what stocks make up the DOW, what it means to the stock market when the DOW drops, what impact it has on your mutual fund and so on. If a term that is unfamiliar comes up in the discussion, have a member of the family look it up in the dictionary or search the internet. Do not be ashamed if a child asks a question to which you do not have an answer. Here is a project opportunity for the both of you to find the answer. Show that learning is an exciting activity we do throughout our lives.
Tool kit. Search the internet using keywords like “financial terms games”, and “kids money” to find all sorts of resources to help your children learn about finances. There are games, puzzles, word searches, newsletters, tips, and other readily available tools for explaining financial terms and concepts to children.
Talking with your children about money and taking the mystery out of the subject is an important part of their development into self-sufficient, productive individuals. The impact of money on our lives is obvious because of the large number of words in the English vocabulary which describe and denote different aspects of money. By helping your child learn financial terms and their meanings, you provide the groundwork for a future successful money manager.