You teach them to brush their teeth and count to 10, but how much time do you spend teaching your children about money, offering solid lessons that will serve them throughout life?
It stands to reason that you will be your children’s guide to money management. Why not harness the fact that childhood is the best time for a person to learn about money and you are the best teacher? Here are eight steps you can take to help your kids become financially responsible:
- Talk to them. If like many children, your parents never talked to you about financial matters (likely because they thought it would burden you), then you know what it’s like to have to figure it out on your own. If you want your children to move into adulthood with good financial sense, begin the conversation now. You can start by letting them know that managing money is part of a balanced life and the more they know, the better prepared they will be for their futures. No matter your child’s age, you can come up with a conversation starter, even if it’s just playing a “guess the price” game at the grocery store or asking an older child to make a simple purchase for you.
- Teach delayed gratification. One of the easiest ways for adults to get into financial trouble is to splurge whenever the mood strikes, buying things when they simply cannot afford to do so. If you have ever been personally overextended, you know the stress it brings. Talk to your kids about the importance of saving for what they want and how much more those items will mean to them if they wait. One way to teach delayed gratification is to allow your children to earn a weekly allowance through chores around the house and do not supplement that allowance. For example, if your son wants a remote control car, give him the opportunity to save his allowance until he has enough to buy it. It may be tempting to “reward” him for saving by buying it for him yourself, but that would rob him of the opportunity to learn how good it feels to work for something and how satisfying delayed gratification can be.
- Introduce the idea of “opportunity cost.” As your child decides how he’s going to spend his hard-earned gains, help him understand that buying one thing means he won’t be able to buy another. It may sound cruel, but the earlier it is learned the less painful it likely to be. For example, if he’s been talking about buying that remote control car and a new video game, help him understand that buying one means he won’t have money for the other – until he saves for it.
- Never attempt to buy affection. Although single parents (and grandparents) sometimes take the rap for this, buying your child’s affection can be tempting for any parent, particularly when that child’s behavior is out of control or they have become a moody teenager. The truth is, your child knows what you’re doing and learns at an early age to associate money with love or feeling better. The last thing any parent wants is to raise someone into adulthood who sees a correlation between money and affection. There are a million ways to show your children that you love them, none of which involve money (or expensive trips).
- Teach the importance of saving for a rainy day. Anyone who has ever experienced a job layoff, unexpected medical
bills,or emergency repairs to their home or auto knows the value of saving for those kinds of expenses. Have a frank discussion with your child about not knowing what the future may bring and how having money put away for unexpected expenditures can make the tough times easier. Then, come up with an amount of their weekly allowance that they would be willing to put away “just in case.” No, your child may never actually need that money, but learning to save early in life helps build the habit. According to Adrienne Penta, senior vice-president of the Center for Women & Wealth at Brown Brothers Harriman, teaching children to save will strengthen their willpower and offer a greater sense of independence – both important traits to carry into adulthood.
- Don’t fight in front of them. Even if you and your significant other have vastly different views on money management, keep it to yourselves. Children are particularly sensitive to parents when they’re upset and will learn to associate money issues with stress and unhappiness. That association may be just enough to prevent them from comfortably learning how to control money rather than allowing it to control them.
- Teach the value of giving. If you look around your home and marvel at how much your children have, encourage them to donate an item for every new thing they bring into the house. There are plenty of places, including women’s shelters and other non-profit agencies, who would love to have a slightly-used toy to offer a child in their facility.
- Open a checking and/or savings account for your child. It’s never too early to teach your children about banking – who we are, what we do, and how we keep their money safe. Opening an account allows your kids to see how their savings are growing and help keep them on track for whatever their goals may be.
Money represents so many different things to people. As a parent, you have the opportunity to decide what you want it to mean to your children. While they are still in your home, you can teach your kids that money management involves little more than common sense and discipline. You have the chance to help them understand how to make the most of what they have, whether it’s a little or a lot.
Chances are, they will thank you one day.