If you scored low in “Understanding of money” category in Financial IQ Test for Parents, please check the activities below!

Do you want to teach your kid what money is or to change his understanding?

Top 3 things you could do with your kid right now

If the kid does not fully understand the value of money

1. Play with a pile of different coins

Give your kid a pile of different coins. Ask him to sort them into separate piles based on size and color. Then explain the value of each coin.

2. Make or buy some play money

Make or buy some real-looking play money – both, coins and bills. Give your kid two coins (or a bill and a coin) and ask which one has higher value. Repeat this exercise as many times as your kid finds it amusing.

3. Play a fake restaurant at home

Make a menu and write down the value of each item in the menu together with the kid. Then ask your kid to serve food and drinks. It is important that you pay for them (with play money)!

If the kid understands the value of money

1. Ask your kid what money is

The answers could be a good indicator about financial beliefs you are passing on to your kid. Consider the answers and explain to your kid that money is means of exchange and that it is neither good nor bad. Each person is responsible for deciding what he or she will do with the money at hand.

2. Look for opportunities to talk to your kid about money

Make it a goal for the next week to talk to your kid about money at least 3 times. Remember that kids learn quicker when they observe environment and when you ask them questions. Make sure that your kid has a general understanding of the following concepts:

• Income. The best time to talk about it is when you receive a salary or get some other type of income. Tell your kid that you have just received a salary. Ask your kid why he or she thinks you get paid. Try to understand his or her thinking and explain the real reasons why you get paid.

• Expenses. The best time to talk about it is when you in a grocery store or when you pay your bills. Ask your kid what the expenses of the family are and where people get money from to pay for those expenses. After you receive the answer, fill in the knowledge gaps of your kid.

• Goods and services. The best time to talk about it is when you are in the restaurant. Ask your kid what the difference between goods and services is. Is a restaurant providing goods or services? Explain why food in a grocery store is goods, while food in a restaurant is services.

• Assets and liabilities. The best time to talk about liabilities is when you are at home. Ask your kid whether your house (apartment) is an asset or a liability? Explain that the asset is something that brings you money when you lose your job, while liability is something that takes money from you when you lose your job. Think of more examples: car, your own business, additional real estate that you can rent, stocks, health, etc.

• Savings. The best time to talk about savings is when you receive income. Ask your kid why saving is important. Explain to your kid how much of income you set aside for saving and why. Explain that different people have different saving habits and tell the story about somebody who saved or somebody who did not.

• Debt. The best time to talk about it is when you either take on debt or you deal with the debt you have now. E.g. if you buy a car using debt, explain the reasons you do that. Don’t be afraid to explain advantages and disadvantages of taking on debt!

• Passive and active income. The best time to talk about it is when you receive income. Ask your kid whether he or she could tell the difference between active and passive income. Explain whether the income you have received is active or passive and why. Tell your kid that the person is a money machine until he creates a money machine which works for him.

• Entrepreneurship. The best time to talk about it when you see an entrepreneur around (a neighbour or the owner of the restaurant). Ask your kid what the difference between an entrepreneur and an employee is. Explain that some people use their talents to start their own businesses. Those people are called entrepreneurs. When you are an entrepreneur, you control how much you earn but that could be either much more than being an employee or much less. Moreover, the income could differ every month.