If you’re going on vacation with your family this summer, why not use the opportunity to teach your children some personal finance skills?
Before you leave, discuss how you planned the vacation and decided how you could afford it. Do you have a vacation fund, and if so, how did you fund it? How did you decide where you would go? Was it determined by your budget, or was your budget determined by your destination? Are you keeping accommodation costs down, or splurging on a luxury hotel, and why? If you plan far enough in advance, you can even involve your child in the funding portion of your vacation planning. For example, I know of one family that collects change in a jar and uses that money to pay for their activities while they’re on vacation.
These explanations will help your child understand that a vacation isn’t just about getting in the car or on a plane and going to a fun destination. And although the explanations are about vacations, the process can easily be applied to other financial territories, such as the decision to buy a new car.
Once you’re on your way, discuss the rest of your vacation budget. How much are you planning to spend on things like food, activities, and souvenirs? Involve your children in coming up with the factors that determine how your money will be spent. Twenty dollars for a park admission ticket might be a worthwhile expense if you will be there all day, but not if you’ll be there for just one hour. You can even discuss the difference, if any, in the cost of living between your destination and your hometown. For example, I live in Los Angeles and was just visited by friends who used to live down the street but now live in Pittsburgh, where the cost of living is considerably lower. Needless to say, we had some interesting discussions about the cost of their vacation while they were out here.
Get your child involved in brainstorming ideas about how to save money on your trip. Maybe you can go hiking, or find other free activities to do at your destination. Your children might surprise you with their ideas, and they’ll be more enthusiastic about doing money-saving activities if they helped come up with them.
Food can make or break your vacation budget, depending on how you eat. Talk with your child about the cost-effectiveness of buying your own groceries and eating in your hotel room, and about whether the savings are worth passing up the experience of eating out and experiencing more of your destination.
You could also give your child a travel allowance, or your child could bring his or her own money on the trip to spend. Talk about the different ways in which your child could spend the money, and how to decide what’s worth the expense and what’s not.
Traveling to a different country is a great opportunity to teach your child about world currencies and exchange rates. A great exercise is to find a chain store with locations both in your hometown and at your destination, and see if they sell the same items, and if so, whether the price is the same. The price will probably differ, so you can have a stimulating conversation with your child about why that is. If you’re feeling ambitious, and depending on your destination, you may even want to tackle difficult subjects like poverty and inflation.