Raising Money Smart Kids
Many of us wish our parents would have taught us a bit more about managing money—it would have helped us avoid some costly mistakes along the way!
Want to teach your kids how to avoid those mistakes? Here are some tips to help you start them down the right path.
Two Approaches to Financial Education
First, consider these two approaches two: direct messaging and teaching by example.
Whether you directly tell your kids what to do with their money and make sure they do it or have your kids learn by watching you manage your own finances, make sure that what you do with your money actually matches what you want your children to do.
Money Doesn’t Grow on Trees
Once your kids enter the “real world,” they are probably going to have to deal with paying for living expenses from a limited amount of funds, like a set salary. So consider getting your kids used to this idea by providing a “set salary,” in the form of an allowance. With an allowance, kids can begin to understand that money doesn’t grow on trees and needs to be spent carefully!
Notice that when your kids have money it burns a hole in their pockets? Don’t worry, that’s normal; they’re just eager to establish their independence and decide where they get to spend their money.
Buy One Thing
That said, it’s important to make them understand that savings is important and spending should be controlled. To do this, you can employ the “buy one thing” rule. Have them make a list of the things they want buy. Then empower them by having them choose just one thing they will buy from that list. For older kids, have them research how much the items on their list will cost. Then sit down with them to compare the cost of one item vs. another. You may be surprised by what your children decided to do!
Set Aside for Savings
Allowance or no allowance, your kid is going to come across money in their pocket. Regardless of where it comes from or how much it is, have your kids set aside a portion of it for savings. This very concept is tough for some adults, but introducing it to your kids before they leave the nest will boost their money smarts now and in the future.
Be a Money Role Model
And I know, as much as we’d like to keep our kids from making money mistakes, they’re going to happen. Don’t fret – mistakes with money now can be the perfect primer for adulthood and also become lifelong money lessons. Again, whatever your approach to teaching your kids about money; make sure that what you do with your money actually matches what you want your children to do. You’re their most important role model and, like with most things, they’re likely to learn from what you do, not just what you say.