The best ways to teach your little kids about money

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JUDY WOODRUFF: Now: teaching the youngest of kids about the basics of money.

Our economics correspondent Paul Solman looks at how parents can help their children learn more about personal finance.

It’s part of his series Making Sense, which airs every Thursday.

CHILD: Maybe there’s some candy in there.

PAUL SOLMAN: In Arlington, Virginia, an unusual venue for little kids.

BETH KOBLINER, Author, “Make Your Kid A Money Genius”: Who knows where we are now?

CHILD: America, Virginia, Washington, D.C., at the bank.

PAUL SOLMAN: What does a bank do?

CHILD: A bank gives you money and stuff.

BETH KOBLINER: They just hand it out?

CHILD: I think so.

PAUL SOLMAN: Where does the bank get money?

CHILD: I think it gets it from a sock.

BETH KOBLINER: From a sock?

PAUL SOLMAN: A sock?

Personal finance guru Beth Kobliner thinks kids should be learning about money early. But they’re not.

BETH KOBLINER: I think parents are much more likely to talk about sex or drugs or alcohol with their children than they are about money.

PAUL SOLMAN: Kobliner hopes to break the taboo with a new book, “Make Your Kid a Money Genius,” that continues work she’s been doing for years.

Kobliner has been teaching key concepts in economics. She insists kids can learn them young.

BETH KOBLINER: By age 3, children can understand basic money concepts like exchange, or we have to make choices, or things have a value.

And those conversations are important to start when kids are really little. By age 7, a lot of those behaviors to do with money, whether it’s self-control or delayed gratification, they start getting set. So, those ages 3 to 7, it’s really kind of a nice sweet spot in which parents should be talking to their kids about money.

PAUL SOLMAN: We gathered our own group of kids to try it out.

How do people get money to give to the bank?

CHILD: My mommy and daddy work and get money. And they buy milk for me.

PAUL SOLMAN: There you go?

And you’re how old? You’re? Just 3 years old.

Another key concept all kids should know, says Kobliner: what it means to work for a living, like here at the NewsHour.

BETH KOBLINER: You bring your kid to your office, and they see where you work. This woman I know, she said her dad would leave every morning when she was little with a newspaper under his arm. And she thought, oh, my dad’s job is reading the newspaper every day.

And then years later, she found out, oh, he’s a teacher. Parents say, you know how hard I worked to make money for you? And kids are like, oh, I guess so.

PAUL SOLMAN: Kobliner also advises teaching kids to internalize the nonmaterial payoffs from work by having them do some.

BETH KOBLINER: Having a child do chores at a really young age, we’re talking about household chores, putting your dishes in the sink, putting it in the dishwasher, putting your clothes in the hamper, that type of thing at an early ages of 3, 4, 5 years old was one predictor of success in life.

PAUL SOLMAN: Like getting a degree or starting a career.

Kobliner also touts a trendy gimmick for teaching kids the uses of money.

BETH KOBLINER: There are three different jars here. One is for…

CHILDREN: Savings.

BETH KOBLINER: This one is for?

CHILDREN: Spending.

BETH KOBLINER: And this one is for?

CHILDREN: Sharing.

PAUL SOLMAN: The key concept here, opportunity cost. If you spend, you don’t have the opportunity to save or share.

BETH KOBLINER: Which do you want to do? Do you want to save it?

CHILD: Share it.

BETH KOBLINER: You want to share it? What would you do? You can either save it…

CHILD: Oh, my gosh. I know which one.

BETH KOBLINER: Which one? Tell me.

CHILD: I’m under the table.

BETH KOBLINER: Spend.

PAUL SOLMAN: Where are you, Vera?

CHILD: I’m under the table.

PAUL SOLMAN: Those of you who ducked out of econ lectures in school might sympathize with Vera’s time-out moment.

But the professor, unfazed, pushed on.

BETH KOBLINER: So, why do you want to spend it? What would you spend it on?

CHILD: Minecraft toys.

BETH KOBLINER: Minecraft toys. Oh.

PAUL SOLMAN: Whitleigh Wilks decided to put one dollar in each of the jars.

BETH KOBLINER: That’s very interesting. Why did you do that?

CHILD: Because I want to do all, all three in here.

BETH KOBLINER: In savings? Wow.

PAUL SOLMAN: And what are you saving for?

CHILD: College. College and high school.

PAUL SOLMAN: Teaching kids to save, says Kobliner, was just teaching them to wait, as in the famous marshmallow experiment.

WOMAN: All right, here’s the deal. Marshmallow for you. You can either wait, and I will give you another one if you wait. You can either eat it right now, or you can wait. Either way.

PAUL SOLMAN: We ran our own mental version.

Suppose I had a marshmallow in front of you now and I said, if you don’t eat it for 15 minutes…

CHILD: I would eat it.

PAUL SOLMAN: You would eat it right away, even though I say I would give you two later?

CHILD: Mm-hmm.

PAUL SOLMAN: You would eat it right — what would you do?

CHILD: I would wait a little while.

PAUL SOLMAN: Could you wait?

CHILD: Yes. I would play with my LEGOs. If there was a fire, I would just cook it.

PAUL SOLMAN: Well, no marshmallow toasting in the actual experiment. Kids were left alone in a room with the mouthwatering morsel right in front of them. In follow-up studies, those who waited longer actually fared better in life.

BETH KOBLINER: They had 200 points on average higher on their SATs. They had better interpersonal relationships, and even had lower body mass indexes.

PAUL SOLMAN: Right.

BETH KOBLINER: It feels at first like, oh, it’s because these kids have this strong moral fiber.

PAUL SOLMAN: And higher I.Q. or something.

BETH KOBLINER: And they’re able to resist it.

But we also know now it’s more the ability to distract themselves. That’s an important trait to have. People who are able to have impulse control or delayed gratification are able to save more money.

PAUL SOLMAN: But how to encourage kids to delay gratification?

Start, says Kobliner, by not giving in to every demand.

BETH KOBLINER: You know, we’re going to go into the store right now and we’re only getting things we need.

Research is showing, when you say yes all the time, all the time, all the time, you are basically making it harder for your kid to experience impulse control, just like another study found those kids were more likely to be in debt problems because they always got what they wanted when they wanted it.

PAUL SOLMAN: Beth is going to give you some real money.

Last stop, a bakery near NewsHour offices in Arlington, Virginia.

BETH KOBLINER: You want to save it, share it, or spend it?

PAUL SOLMAN: We gave each kid $3.

BETH KOBLINER: What do you want to do?

CHILD: I will share it.

BETH KOBLINER: You want to share it? Who are you going to share it with?

CHILD: With him.

BETH KOBLINER: Oh.

PAUL SOLMAN: With me? Oh, that is so sweet, Vera.

Turns out, however, that the allure of an almost-$3 dollar cupcake was irresistible.

Ultimately, everyone succumbed, providing Kobliner with a segue to another of her concepts.

BETH KOBLINER: Is it better to buy things with a credit card or with dollar money, paper money?

CHILD: Dollar money.

CHILD: I would do credit card.

PAUL SOLMAN: Credit card? You think credit card is better?

CHILD: I think it’s better to use a credit card, so you can save money.

PAUL SOLMAN: You won’t be surprised to hear that Kobliner recommends cash, so kids are aware they’re actually spending when they buy something.

BETH KOBLINER: They don’t see cash any more. They see cards being swiped and phones now being swiped with Venmo and Apple pay and all these ways of paying for things.

An MIT study found that when people use a card, they spend up to twice as much then when they use cash.

PAUL SOLMAN: As for paying off credit cards to avoid interest, OK, hold that until middle school.

Of course, Kobliner acknowledges that teaching econ to tots isn’t always easy.

Why do you now think it’s better to buy with cash than a credit card?

CHILD: Because — because, like — I don’t know.

PAUL SOLMAN: But why not start trying sooner, rather than later?

Can I have a bite of yours too?

Sometimes, the results can be simply delicious.

Mmm. Thank you so much.

This is economics correspondent Paul Solman.

CHILD: And he is reporting from Best Buns Bakery.

PAUL SOLMAN: Oh, delicious.

CHILD: Thank you.

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