Why Kids Don't Understand the Cost of Living

Here’s an eye-opening activity for the whole family. Everyone sits down at the kitchen table with the monthly bills, and the adults start paying them. As the parent introduces each bill, Mom or Dad should comment on it. Here are some points to discuss.

• How some bills stay the same while others go up and down.
• That some bills come every month; some come quarterly.
• How some bills come unexpectedly -- like the plumber’s bill when the pipes burst– but you have to have the money on hand to pay them. That’s why everyone needs a cushion fund!
• What happens if you don’t pay your bills on-time.
• How credit card accounts rise and fall from month to month, depending on how much you spend. (Just taking a credit card bill and looking at all the items on it and how they add up to a large bill is a great activity all by itself.)

If you really want to make your point, bring piles of cash to the table, and stack the currency on top of each bill you pay. When you’re done, the family should use a calculator to total all the payments — cash or checks. Then add in the cost of a month’s groceries. Let that total sink in. Then explain that you pay many of these same bills over and over every month. Depending on the age of your children, have them pretend to be ready to move out on their own and live on a budget. TheMint.org has just the right teaching tool - Living on a Budget. They will explore salaries and choose to buy a car, or take the bus. And if the budget does not balance, they can do it all over again.

Visit TheMint.org for more great ideas to help you help your children become money smart.

Other resources:

Helping Kids Grow to Become Money Smart
Teaching Money Management Basics – Start Young!
Preparing for the Day They Leave the Nest