The picture below is of my son and I. He is just 2 and a half but already quite a handful. He always keeps us busy. He’s very smart in a way to tell us what he needs. Just in a few years, he’d soon be getting his pocket money, then his own college expenses account. We want him to be smarter than us in money matters.
I grew up in a frugal lifestyle in India, our son is growing up in a relatively well-to-do household in the USA. What I am saying is, compared to where I grew up my son is getting a better lifestyle in terms of spending money on various necessities of his young life.
So it’s more important to not spoil him with things that he doesn’t need. Spoiling him will make him now but in the long run, he might be in trouble.
As for you, before your teenage son or daughter packs up and confronts the real world on their own, make sure you teach them some important financial lessons. Knowing a little when it comes to their personal finances will help them in bucket loads, and prevent them from falling into any financial trouble in the future.

I am with my son
If you’re wondering just what lessons will benefit your children in their financial future, read on. Here are 5 of the most important.
1. Spend less than you earn
I think this is the best financial advice parents can give their children. To become financially successful in life more saving is even more important than more earning.
I’ll start teaching this by example and experimentation. Even without money, you can teach the importance of saving, you just need something valuable and durable.
Also, another important lesson that can be the #1 item on any list, is the advice to earn money in a legal and ethical way. Any money earned in an illegal or unethical way can’t bring happiness in life.
2. Stay away from credit cards, if you can’t pay off the balance every month
There are many advantages of using credit cards. But unless you pay off the balance every month those advantages no longer exist. Credit cards then become your nightmares.
I’ll show my son how I use cards (I have 8 credit cards) and how I earn and use points and miles to make our vacations cheaper. How I don’t carry cash or sometimes even the physical credit card even, just paying with eWallet is all that’s needed for shopping, will teach him other benefits of cards.
It’s important that you drill into your teenager to only use the money they actually have. Sure, it will be tempting for them to fund that quick Bali getaway on their shiny new credit card.
But the relaxation they get from the trip will pale in comparison to the financial stress they’ll find themselves in when they get home; it simply isn’t worth it.
Indeed, credit card debt is a problem found among too many teenagers.
Don’t let your teenager be one of them, and make sure they know that credit cards are only to be used in emergency situations and to pay for things they actually can afford.
3. Set a savings goal
As the often used expression goes: “if you fail to plan, you plan to fail”. Make sure your teenager has specific savings goals that they’re working towards each year.
And then make sure they’re putting money aside each week. It really doesn’t matter how much it is. What matters is consistency, and developing good saving habits.
4. Shop smart
I’ll teach him to differentiate between needs and wants. I’ll show him how he will exhaust his pocket money once he starts giving in to impulses. I’ll first let him decide and spend his money the way he’d want to.
Gradually, I’ll teach him the art of shopping around and bargaining, and you’ll have taught them a fine financial lesson that will pay dividends for time to come.
I’ll show him the way I do research to find the best deals on big-ticket items or even smaller items.
This includes shopping around both online and offline. Don’t forget to teach them how to bargain. This doesn’t mean teaching them how to be rude to shopkeepers and consultants on the phone.
Show them how to bargain whilst still being polite and friendly. You’ll often find your bargaining powers to be more effective this way anyway.
4. If you want it, earn it
I do not want my son to grow up thinking about his parents to bail him out of any bad financial situation. We are teaching him to be independent even now.
It’s understandable that you want you teenager to have as comfortable a life as possible. But giving them what they want – without making them work for it – won’t do them any favors.
Make sure you instill in your teenage boy or girl that they need to go after what they want.
This means getting a job and working for that new car, holiday, or guitar themselves.
Not only will it teach them about personal responsibility and the value of hard work, it will also do wonders for their confidence as they realize that they can achieve whatever it is they want with a little effort.
5. We will not bail you out (well we will try not to at first)
Related to the above point, it’s also vital that you don’t bail your son or daughter out when they find themselves in a bit of financial trouble.
This doesn’t mean completely abandoning them but simply means that you should avoid giving them the easy option and paying for whatever mess they find themselves in.
We will wait till the very end before chipping in with help. No parents want to see their child suffer, isn’t it? Also, ultimately our savings are his savings when we won’t be there anymore.
By all means, give them the emotional support they need just wait and watch till they find their way out. You may think you’re helping them, but in the long run, you’ll harm their sense of confidence as they won’t be able to come out the other end all by themselves.
It’s important that your children know the basics of managing their personal finances. Do them a favor and make sure they don’t leave home without knowing the above.
No doubt you’ll be a proud parent for years to come.
Comments
Trackbacks
-
[…] 4. 5 Financial Lessons I’d Teach my Child […]
We have taught our 13 year old most of the lessons you’ve listed. Even though he is too young to have a credit card, he knows that we never use a credit card unless we have the money in the bank to pay any charges we make.
He is a great saver and has over $1k in his bank account.
I also made sure that he knew early on that television commercials and other marketers are constantly working hard to try to separate him from his money. Recently, I also showed him evidence of a phishing scam on my computer. I did not click on the phishing link in the bogus email, but I demonstrated to him how the link in the email did not point to the server address that it said it did. I told him that he should never click on a link in an email, and that he should never open an attached file unless he knew the person that sent it. And even then, he should be careful and verify that the file is valid before opening it. He is getting into computer programming in his spare time, so he took this lesson to heart.
Essential tips. Though another financial piece of advice could be ‘don’t go to university’, or more specifically ‘don’t get a student loan’. It’s a debate that has good points either end, but university degrees are becoming increasingly ineffective in order to earn a living, and the loan can put young persons in the red for decades. Perhaps this can of worms is already very much open.
@Alex, I agree with you on avoiding student loans, but I cannot agree with avoiding college altogether. I am a mechanical engineer and my wife has dual degrees in mechanical and aeronautical engineering. We would not have our lucrative jobs without college. I used the old GI Bill to pay my college expenses. (That cost me only 4 years in the Air Force.) I also lived at home while attending college, so my room and board were paid for, which the GI Bill did not cover. Working while attending college, as well as seeking out all student aid and scholarships, is another possibility to avoid taking out loans.
I fully plan on letting my children know that MY money is not their money. I also will implement allowances and pay for necessities but anything else that they “want” they will have to save up for and buy.
My children are now grandparents themselves. I don’t think we gave them much instruction on finances. When they were in their early 20’s my husband would say always keep a “cushion”: in your bank account. Today it is called an emergency fund. However, they must have learned something from our example as all three have handled money wisely.
SB, it was good to see a picture of you and your son. You are both very handsome
I agree with all those points. We must say that the new generation is more smarter for money management.
You had little trouble with the numbering…
My parents taught me the exact same things with the exception of “Set a savings goal.” The problem with that is if you set your savings goal too low, it will be easy to meet and may encourage wasteful spending. I would characterize my parents’ lesson as “Save as much as you can and that still isn’t enough.” An adjunct to that lesson is “Save more (dollars and %) next year than this year.” Barring major life events, you should save more every year if you are getting raises at work. If you aren’t getting annual raises at work, consider a new job. When major life events re-set your spending and therefore savings, start over with “save more next year than this year.” If you are single, it is easy to control your spending and saving each year. If you get married maybe you can save more as a couple than as two individual. Maybe you have to save less because you spouse has debt that you want to pay off. After you have children maybe the baseline living costs go up.