Some Simple Truths About Money For Kids
While it may seem like ages until your kids are faced with serious financial decision-making, it’s never too soon to get them on track towards fiscal responsibility. Most experts believe in a two-prong approach: teach children to have both a healthy attitude towards personal finances and, at the same time, be savvy and responsible enough to manage their day-to-day and long-term needs.
So how to get your kids on the right financial track now? By tackling these seven key learnings ASAP. Consider each a series of age-appropriate steps towards true financial mastery. Start small and clear-cut and, you’ll see, even preschoolers can begin to master many of these concepts.
As your children grow up, pick up both the pace and the depth of your lessons to match their own financial journeys — maybe it’s their allowance or their goal of saving for a video game, a car or anything in between. The end result? Kids who have a solid handle on and healthy relationship with their own personal finances.
TEACH THEM…that money comes from work
It’s a simple but incredibly critical lesson: money comes from work. It’s not a gift. It’s not something you’re entitled to. It’s not something that magically grows or rebuilds. No matter who you are and what you do, more likely than not you’ll earn money by working. Seeing you and/or your spouse go to work everyday sends a great message — you’re working hard to provide for the family and, one day, they’ll do the same for theirs.
To drill down on this lesson now consider weekly allowances tied to specific chores — chores completed well. Got teens? Part time jobs are a great way to drive this lesson home. Consider matching his earnings if there’s a big picture item in the future — a car, a graduation trip or costly gear, for example. By encouraging him to map out his path to achieve his savings goal you’ll be helping him connect the dots today and tomorrow.
TEACH THEM…when it’s gone it’s gone
Grandma and Grandpa sent your little one with a few dollars for her birthday? Turn it into a learning experience. When you get to the store remind her that she has a set amount to spend and when it’s gone it’s gone — you won’t be buying anything else or contributing to “add-ons.” Watch her navigate the store and weigh her options, and be prepared to help assess the pros and cons of various purchases. Chances are she’ll be proud of herself for making such a grownup decision and — bonus! — you won’t have spent a cent.
Again, as your kids get older be prepared to loosen the reins a bit. Though it’s important to remind a tween or teen that when their funds are gone they’re gone, often it takes a few missteps for this message to resonate. If you gave your child $20 at the beginning of the week and he immediately spent it on a movie ticket and tons of snacks, that money’s gone — and that means no trips to the mall, no late night pizza orders and no weekend spending money.
TEACH THEM…it’s OK to wait (and save!)
No matter the age this lesson is simple — and critical. While it’s tempting for a child to spend every penny she gets the moment she gets it, it’s also good to help kids set goals for short- and long-term wants. You could get the stickers today or you could put that money towards a bike you’ll get next month. You could go to the movies again or you could hunker down for an at-home movie night, and stash the cash for the upcoming senior trip. Help your kids understand both sides of their purchase decisions so they can see that, often, saving for the bigger and the better is the way to go.
TEACH THEM…it’s not all about YOU
Even preschoolers can understand the value of giving to others. Start small — maybe you tap your kids to help sort their old clothes and toys for charity. Once you’ve established that some families and some kids don’t have as much as they do, consider setting up some giving goals. Maybe, as a family, you donate a percentage of your weekly earnings to charity. Or, alternatively, you toss all of your change into a jar at the end of each day and donate it at the end of the month. Whatever you choose be sure everyone’s on board and everyone contributes their fair share.
TEACH THEM…where their money should go
Sometimes overarching lessons can get muddled in the day-to-day — sure it’s important to give, but what does that look like? And, while it’s great to save for the big stuff, what about the things I need today?
A great way to show balanced allocations? An envelope system. Start by dividing your own weekly expenditures — the bills, groceries, entertainment and other extras — into envelopes, each marked with the expense. Have your child do the same with his allowance — that $30 needs to cover ice cream at school, plus pizza at the sleepover party, a new app he’s been dying to download…the list goes on and on. Give him small bills so it’s easy to count out what’s needed for each expense and tuck it away in a dedicated envelope. Out of cash? Peek back in the envelopes and see what can be moved around — or what needs to wait until next week.
TEACH THEM…not to buy things they can’t afford
Chances are your kids will want — and, even, need — a credit card in the future. Not only are there plenty of purchasing perks, but having a credit card helps them build credit history and a solid score, both of which comes in handy for everything from buying a car to getting a mortgage to, even, getting a job.
That said, teaching kids the value of living within their means is key. If you’re constantly giving them cash to supplement want-to-haves you might be putting them at a disadvantage when it comes to this valuable long-term lesson. If they’ve blown through their allowance — despite your warnings, your envelopes and your reminders that when it’s gone it’s gone — consider it a teachable moment and try to help them understand how to budget better next week.
TEACH THEM…to always value contentment over wealth
While it’s important to teach your kids the value of money, it’s also important that they have a healthy relationship with it — and that means understanding that money can’t buy everything. Hoarding money, putting wealth above all else or always striving for more, more, more can be a recipe for disaster and disappointment. Help your kids understand that, yes, money can buy great experiences and can, even, do plenty of good for the family and for others. But, at the same time, make sure they understand that relationships, people and moments in time — the free things — have the greatest value and the greatest potential to make us happy now and in the long run.
And that’s something money can never buy.