The following guest post is the second of a three-part series by Dr. Douglas Rice, who volunteers as a financial planner with United Way’s SparkPoint program. SparkPoint Centers are one-stop financial education centers that help families move out of poverty and achieve lasting financial stability. Learn more at www.sparkpointcenters.org

Lesson #2: Money is Time

Frame your spending choices in the increments of time it takes to do the work to earn money, and you’ll change the way you see your decision: If you have money, you don’t need to spend time working. If you don’t have money, you need to work and that takes time.

For adults with money, you can pay someone to cut your grass, clean your house or cook your food. If you don’t have money, you need to spend time doing that stuff. If you have some money and enjoy gardening, but not cleaning you house, then the decision becomes obvious.

Also, if you have the opportunity to make money, perhaps by working overtime or a side job, and you make more doing that than you would spend to have someone mow your lawn or clean your house, then that decision becomes obvious as well.

But when you frame money terms of time for your kids, decisions can be dramatically different. Ask a child which they would prefer you do – work long hours and have a nicer car, house or vacation, or spend more time with them and drive a clunker, rent an apartment or stay home on vacation.

Money frees you from doing things you don’t want to do and allows you to spend more time doing what want. It’s helpful to be very clear on what you want and what they want.

Check back next week for the final installment in “Money Lesson for Kids.”  Click here to read Lesson #1.

Dr. Douglas Rice is a certified financial planner and registered investment advisor. For more information about financial planning or Dr. Rice, visit www.douglasrice.com.

The following guest post is the first of a three-part series by Dr. Douglas Rice, who volunteers as a financial planner with United Way’s SparkPoint program. SparkPoint Centers are one-stop financial education centers that help families move out of poverty and achieve lasting financial stability. Learn more at www.sparkpointcenters.org.

If financial literacy were taught in educational institutions as well as it is taught by the school of hard knocks, then parents wouldn’t have to worry about their kids learning about money. But because experience is typically the way most people learn best, and in finance, that can be expensive, perhaps a few lessons about money might save the kids – and you – a few bucks.

Specific money lessons are easy to find. You’ll often see information like “10 tips on taxes,” “five ways to find a mutual fund” and “seven ways to save money.” But what’s missing is a way to make decisions. The best way to think about money is so that decisions aren’t based on a set of rules that can change, but on a set of guiding principles. With that in mind, here is the first of three lessons to teach your kids about money.

Lesson #1: Money is Stored Work
If you think of money as stored work, decisions about saving and spending become much easier.  Ask, “Would you spend the weekend working in exchange for that toy?” By framing the question like that, the relationship between cost and value becomes much clearer. Without an understanding of value, how can a kid make a choice? They just want everything because money has no value.

When it’s stored work the kid is spending, the toy isn’t valuable. But when they have to do chores for two full days to pay for it, or even just know how much you have to do to pay for it, all of a sudden you may have a little miser on your hands.

If you’re having trouble with the concept, remember that the reason we need to use money is because the barter system is unwieldy. No one wants to trade chickens for corn because our options would be limited to what we could make ourselves. We use money to facilitate the transaction so we can all have chicken and corn, but trade our skills in exchange for it.

Also, by teaching them about money as stored work, you are teaching them about work. Once connected, the two things allow decisions to be made about school, careers, skill building and more. This should drive home more lessons than just how to balance a check book.

Check back later this week for the next Money Lesson for Kids.

Dr. Douglas Rice is a certified financial planner and registered investment advisor. For more information about financial planning or Dr. Rice, visit www.douglasrice.com.

Photo courtesty of Razor512 via Creative Commons license.