I love my children and I want the very best in life for them. I want them to avoid making the same mistakes as I made. I want their future to be brighter and fuller of opportunities than mine was. I want them to live healthy, happy and properly balanced lives.
And I am more than certain all parents out there are the same.
Unfortunately, though, living in a consumerist world means that you have to be extra-careful with the upbringing of your children – especially when it comes to their financial education.
What does it take to raise children that are genuinely careful with their money?
We have gathered some of the best tips to help you raise financially responsible children – so read on if you want to find out more.
Give Your Kids the Chance to Save
You cannot teach financial responsibility to someone who doesn’t even know what money is and how it can be used. Offer your children the chance to actually interact with money by giving them a monthly (or weekly) allowance.
Also, it is perfectly fine (and even recommended) that you stimulate good behavior with small rewards. Create a sense of value, though: you should only “pay” for the extras your child does, not for the normal chores he/she is tasked with as a member of the family.
If you don’t want to give your kids actual money (or at least not for them to keep), you can use play money, stickers or any other items to which you can allot a certain value (one sticker=$1, for example). Then, when your children want to spend their money, you can replace the “tokens” with real money.
Talk to Your Kids about Money and Set Goals with Them
Keep in mind that simply giving your children money isn’t enough without talking with them about what they can do with it. Ideally, it’s great to establish a system where the child has the option to save, spend or give the money.
For instance, I gave my kids three piggy banks – for each of the aforementioned actions – and they have to split their “earnings” into all three equally. When they want to they can transfer money from one piggy bank to another, but we always discuss it first so that they understand their actions will have consequences.
Furthermore, it is important that you always emphasize the importance of long-term goals – because this is precisely how your kids will learn to save their money. For example, you could tell your child that they can buy a new video game in one month with the money saved – but that they can only buy a bike (or any other pricier item) after a few months’ time of saving.
Children have short term memories and little patience – so always remind your kids how close they are to their goals. And when they reach them, make sure you praise the event and make it a true celebration. Your children will thus learn about the satisfactions saving money can bring into their lives.
At the same time, do not be too admonishing when your kid makes a bad purchase. Tell them how they can learn from this mistake and show them exactly what the consequences are (there are “X” dollars left in the piggy bank, which means they will have to save for a longer period of time to buy that bike).
Set an Example for Your Children
Your kids have a much lower chance of growing into financially responsible adults if you are not one yourself. Set an example for your kids and be the kind of adult you want them to grow into.
When your children see you creating shopping lists and sticking to them, and when they see you making sane financial decisions, they will take on this behavior and most likely make it a routine that they keep for the rest of their lives.
On the other hand, if your kids join you for grocery shopping and see you spending money on items you didn’t really need, they will probably “copy” your habits and grow into the same type of spender you are.
What Not to Do?
While there are many things you can do to help your kids learn financial responsibility, also bear in mind some things you should never do, such as:
- Making money feels like a taboo subject. It will make your kids grow up with a negative attitude towards money, which will have a negative impact on their finances.
- Fighting over money (or placing the blame on another member of the family for a lack of money). This is an entirely unhealthy approach to bring into your child’s life and it should be avoided at all times.
- Making debt feel too normal. When kids grow up in a household that’s burdened by debt, but where parents grow too accustomed to it, they will most likely take on the same burden as adults.
- Comparing money and happiness. Your kids should not believe money brings happiness, nor should they believe it’s completely unnecessary for a happy, comfortable life. Make sure your reasoning towards this is very well-balanced so that your children grow up with the same thoughts.
Teach your kids how to deal with their finances (as limited as they may be at this stage) and they will learn how to be responsible about this aspect of their lives early on. As they approach adulthood and they get hold of their first credit card (as most teenagers do these days), they will know how to manage their money and how they can spend it in a smart way.
Eventually, they will grow into adults who know the ins and outs of how to use money to their benefit (and not make it their primary focus in life – be it for the best or for the worst).
About the Author – Gerry Macklin
Gerry Macklin is a financial planner based in New York, with an avid passion for writing about personal finances and business. He’s a great fan of U2 and he loves watching Almodóvar movies in his spare time.