Train up a child in the way he should go: and when he is old, he will not depart from it. ~Proverbs 22:6
Now that I have children of my own, I am learning more about the importance of money and the lessons I've learned the hard way in this area. There are many habits I wish I would've learned long ago.
Growing up in my household, money was one of the subjects that was secretive and silent. The cost of things were hidden from others and any time a conversation needed to be had about money, the mood was often tense and defensive.
Because of this, I plan on teaching my kids about money. How to talk about it, handle it, plus some skills and habits that will help get them off to a good start.
Most importantly, I hope to have them learn by doing and from my wife and I's example.
There are some basic principles to follow when it comes to money.
- Set a good example. It's too easy to fall victim to the "do as I say, not as I do" idea. The problem is, kids follow what they see you do more than what you say. If you hope to teach them about controlling their spending, you have to do it as well.
- Learn about money yourself. You can't teach something you don't know about. Take the time to learn about budgeting, investing, saving, reducing debt, etc. Then you can pass this knowledge on to your kids.
- Teach them one thing at a time. Your kids are not going to become financial planners overnight. Don't rush it. Plan to teach one lesson at a time, over the course of their childhood.
- Kids learn best by doing. You can tell them and they may learn some of what you hope, but give them the chance to do it and they'll learn even more. Let them make mistakes. Then talk about the mistakes with them. It's better to make mistakes while they're young rather than as an adult.
With these principles in mind, here are 11 lessons you can use to teach your kids about money:
- Give them control of money. This is one of the best things you can do for a child. It teaches them that things will not always be given to them. Some things must be earned, saved for, or gone without.This can be as simple as giving your kids an allowance. I am a big proponent of kids having to work for their allowance however. Even my 3 year old must make her bed and pick up her books each day in order to receive her allowance of 50 cents each week. By giving her charge of a little money while she's young, she can learn how to handle more money later.
- Teach them the value of saving. As my kids watch their favorite cartoons, I hear them say "I want that" many times during the commercials. While this is proof that the commercialism and materialism will remain alive and well in our society, it's also an opportunity to teach them about saving money in order to get some things in life. Both my kids get really excited whenever they get the chance to put money in their piggy-bank.This is a simple way to help them start the saving process. As they get older, they'll get the chance to go to the bank and deposit their money into a savings account.
- Teach them the value of giving. Another important aspect of money management for me is the value of giving. We choose to give to our church first, then other causes as the need and funds are available. Wherever you choose to give, teaching your kids to join in the giving is a great lesson.The fact is that our communities need help from each of us. By giving to others, you can help them in their time of need. And who knows, one day the roles could be reversed. It's happened to us and just when we were working on how to cover this bill or pay for the next set of groceries, some friends surprised us with gift cards taped to our door or other friends shared some of their money.
- Teach them how money can make money. Investing is a great way to make additional money with little to no work. It's one thing to save money and earn a whopping 2%, it's another thing to take a bit of a risk and possibly earn much more.Investing works best when the money is not needed for the short term. If your kids are saving for some short term goal, the bank is the safer bet. But if this money is for a longer term goal, invest away. That way their money has the chance to make money.Plus what a great learning opportunity. Teach them about the types of investments available as well as how to monitor the growth. Capitalism at its finest.
- Teach them that cutting expenses can make goals come faster. As my wife would state, it's simple debits and credits. What's going out versus what's coming in. If your kids can learn this simple concept (although many adults still don't seem to get it), their ability to handle money will be solidified.If your kids are wanting to reach some goal with their savings, then cutting expenses will allow them to reach it faster. It's common sense but worth reiterating.
- Teach them how to create a budget. I know. I know. I used the "B" word, but it's an important aspect to life. Learning how to live within your means is an important aspect of daily life. And budgeting is a great way to help make this happen. This doesn't have to be a complicated thing. Simply sit down with your kids and go over their expenses. The big thing they'd like to save for, the amount they can spend freely, the gifts they need to buy, etc.Obviously this is adapted to be age appropriate. But teaching them how to budget while they're young will pay off huge when they are older.
- Teach them to pay bills. Do your kids have their own things? Cell phone? Car? Who pays these bills? Give them the amount in their monthly budget (unless they have a job to pay for these things) and allow them to pay the bills each month. It will teach them a valuable lesson for life. If you don't pay things on time, they get turned off or taken away. You can monitor this process to assist them as they get started, but part of growing up is learning how to take care of yourself and living with the consequences of your actions.
- Teach them about the dangers of debt. This is not a concept my 3 year old can grasp yet, as she gets older she will. The amount of debt students are carrying when they leave school today is staggering. Teach your kids about loans, credit cards, and other debts. Give them a credit card with a limit imposed on the card. Teach them how paying the minimum payment on credit cards is often a fast track to getting deeper in debt.
- Let them work for their money. To this day, I'm convinced that I was born in order to mow and do chores for my parents. In fact, I think I learned to walk behind a lawn mower. OK, so not really, but I had to work for the things I received. Let your kids earn their money. This could be through chores around the house to getting a part time job. If they'd like to earn a little more money, give them extra jobs. It's the way the adult world works, so let them have an age appropriate taste of it while growing up. It will teach them a better work ethic.
- Teach them about materialism. Every time my kids watch cartoons, during the commercials I hear "I want that." Materialism runs rampant in our society. This is due in large part to the effects advertising, marketing and consumerism has on us all. Teach your kids about the dangers of materialism. Teach them about the goal of advertising: to encourage you to buy their stuff in order to be part of the "in" crowd. When in reality, all you end up with is a house full of clutter and wasted stuff.
- Teach them about impulse buying. This is closely related to the previous point. Teach your kids to pause before buying something. To weigh the costs and the need before spending their money. To learn patience. I realize this may be difficult, but it's a valuable lesson we can all benefit from.