Shireen Sajadian McVan worked as an estate and tax attorney in Philadelphia and Northern Virginia for over 8 years before traveling with her husband and daughters to their first overseas post. When Shireen isn’t working with Logbook, you can find her chasing after her three girls, exploring her new city, and pretending to enjoy yoga.
The idea that young children aren’t able to understand the concept of money or cost until they are old enough to count is not true. They see their parents using ATMs for cash or using plastic cards to pay for groceries. We parents need to find the time and patience to start teaching them early. And, as we all know, time and patience are limited resources.
So what are some easy ways to start helping our kids understand the value of a dollar, manat, pound, yen, etc.?
Involve the kids early on, and (try to) make it fun!
Many of us posted in oversees countries with cash-based economies handle paper bills that, unlike the US dollar, vary in size and color. This is a great way to familiarize young children who may still not be comfortable with numbers with using money. My girls especially like the "purple ones," which are, of course, the highest denomination in the country where we currently serve so we’re off to an early start with money discussions.
At our current post, the value-added tax (VAT) for which we can file a return is 18% (this differs from country to country and from year to year). We are required to ask for a special receipt when making certain purchases and those receipts must then be indexed by date and submitted to the embassy every quarter. We have made this somewhat tedious task into a math literacy game that our five-year-old and two-year-old help us play. Not only do we ask them to request the special receipt at the store (and practice their foreign vocabulary), we also have them assist with arranging the receipts we’ve gathered in chronological order for submission. Once they are a little older, maybe we’ll add a cost-estimation component and eventually let them organize the paperwork themselves but, for now, this has become a good exercise in teaching dates and numbers – and starting healthy discussions about budgets.
What to do with all of that “extra” money that you now have lying around from your VAT return? While there are pros and cons to every method of administering allowance to children, allowance does teach kids money management skills. A study conducted by Jump$tart Coalition for Personal Financial Literacy found the more communication kids have with their parents about money, the more capable they felt in managing their own finances. If your children are old enough, you could allow them to retain a percentage of your VAT returns as an allowance or commission. If you have younger children, you could get them a piggy bank to fill. That way there is a concrete representation of the money that they have saved.
You could also consider opening an interest-bearing account and talk to your family about investing the money for a rainy day, an emergency, or a family vacation. There are several banks that have decent returns by today’s standards. Older children could help you choose an account or CD and have access to the statements to see how their money is growing. Treasurydirect.gov allows you to buy treasury securities or treasury bills (T-bills) directly from the US government. The site is relatively easy to navigate and links directly to your pre-existing bank account. 4 week T-bills are currently yielding over 2.4% which is more than you can get in most other places. There are no fees or minimums and your money stays in your current bank, being withdrawn when you purchase a security. Proceeds from maturity are automatically sent back to your bank unless you reinvest. Additionally, you have some peace of mind in that you are dealing with the US government, as opposed to a bank.
You may also consider investing into 529 plans for your children or opening up a joint bank account with each child. This would help build their credit and give them some additional perspective in regards to banking and financial responsibility.
Part of teaching fiscal responsibility and money management is allowing our children to save and spend on something they really desire. With age comes greater conversation and responsibility but neither will feel as daunting if you start developing smart financial habits and healthy conversations about money with your whole family from an early age.
Shireen contributed this article in her personal capacity. The opinions expressed in this article are her own and do not necessarily represent the views of the Department of State or United States Government.
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