5 Financial Lessons Everyone Should Learn by Kindergarten

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Big Saver
Andrew Rich
By Kentin Waits

We each grasp financial lessons at different points in our lives, but we're never too old -- or too young -- to start learning. Some lessons, however, are so basic that understanding them is nearly a prerequisite to financial survival. Whether you need a refresher yourself, or are responsible for shaping a young person's relationship with money, here are five financial lessons everyone should learn by kindergarten.

1. Money Represents Labor

At its most basic level, money is just labor in physical form. Whether you worked for it using your mind or your muscle, the green stuff is the result of some form of effort. And without making your 6-year old mop the floor for a bowl of mac 'n cheese, there are ways to gently and positively make the connections between effort and financial reward.

Of course, the secondary value of this lesson is how it can alter spending behavior. The "aha moment" you want to encourage goes something like this: "If money is labor, then the things I buy with my money also represent my labor." Fully grasping that concept is the root of healthier spending behavior for life (and if you're like me, you know a shocking number of adults who still don't quite get it).

2. Spending Is Not the Same as Investing

Though each may drain our wallets and bank accounts for a period of time, spending and investing are entirely different animals. Dropping $3,500 for a leather couch is spending, but using that same amount to buy a good used car that will get you back and forth to work is investing. Think of it this way. If the item or service you're buying will provide some sort of tangible dividend (such as the ability to stay employed, advance in a career, sell at a profit later, etc.) , it's an investment. If it doesn't meet that simple criterion, it's just plain old spending. If you haven't already, learn the basics of investing and put its power to work for you sooner than later.

3. Consumer Credit Is Dangerous

It may not seem this way, but every time we use a credit card, we're taking out a loan. Granted, it might be a mere $3.89 for a hamburger, but it's a loan. And let's face it, the last thing credit card issuers want their customers to do is pay off their balances every billing cycle (credit card companies have an endearing term for those who do -- "deadbeats"). They'd much rather have all those hamburgers, shoes, smartphones, and haircuts add up at a 17 percent interest rate.

Teach your kids the dirty secrets of credit cards. Tell them about the evil geniuses that lurk behind the magnetic strip. You know, the ones who conceived the evil formula of convenience + frequent use + low minimum payments = long-term debt and high returns. Create a bedtime story about an overspending prince who became a pauper because of plastic. It's a cautionary tale for the ages.

4. Wants and Needs Aren't the Same

When I was a kid, I desperately wanted a green plastic toy box shaped like a large frog. I don't remember the brand name, but I do remember wanting to own one so badly that every fiber of my 40-pound body nearly vibrated with green-plastic-frog-toy-box desire. I never got it. Kids want things with such wild enthusiasm that it's difficult for them to distinguish what they want from what they need. Had I been asked way back when, I'm sure I could have made a case why that frog toy box was essential to my survival - because it certainly felt that way.

But at any age, being able to clearly distinguish wants from needs is an essential skill. Why? Because we live in an economy that's made a science of confusing the two. Indulgence and denial aside, it's the identification that matters and it's the first step of being able to live within our means.

5. Money Can't Buy Happiness, but It Can Buy Choices

The value of money rests not in its ability to make us happy, but to buy us options in life. Authentic, well-financed choice is a rare bird these days. Many of us feel like we have choices, because we're presented with so many options as consumers every waking minute. But to me, most of these sorts of choices feel low-value - "trinket choices" manufactured purely to encourage spending. Only the most financially disciplined can afford to exercise a potentially life-altering choice like switching careers, moving across the country, starting a business, or retiring early. This level of choice gives us the power to reinvent ourselves at any stage of life.

Granted, these are only five lessons in a long list of financial fundamentals. But together, they form a great foundation for building security and wealth. If you're still learning, let your curiosity motivate you. And if you're helping a young person learn, be patient and avoid instilling a sense of fear about money. Remember, real power comes from understanding that money is not mysterious, wealth is not always the result of dumb luck, and financial security is within our control.

What financial lessons did you learn early in life? Who taught you and how? Which ones are you still learning?
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