Kids and Money – 5 tips to raising money smart kids
I have come to realize that many adults are in financial trouble today because they were never formally taught how to properly handle money. I can honestly say that I don’t remember ever being taught a system of money management to get ahead in life.
The results of students who took the 2008 Jump$tart Coalition Survey of Financial Literacy for personal finance received failing scores. A majority of the 4,000 High school students scored an all-time low score of 48.3%. This month I want to share tips on how to raise money smart kids. Like all parents I want my kids to grow up happy and to have some of the things life that I wish I’d had growing up. At the same time I realize that we as parents have to find a balance between giving our kids too much. In the end I want to instill habits in them that will allow them to be productive and to thrive. So how do you make sure your children grow up to understand the value of a dollar, hard work and to pay their bills. It’s simple you teach them, here are five tips to raising money smart kids.
Be an example – when it comes to teaching children about money the best example will be the one that you set. If a child doesn’t ever see their parent(s) exercise discipline, how can we expect them to understand the concept? I am convinced that the reason that more parents don’t teach their children about personal finance is because they themselves haven’t gotten a handle on money. This may mean that in order to be an example you may have to get yourself educated on financial matters before teaching your kids about money.
Start Early – It is never too early to teach kids about money. However, what you teach then should be age appropriate though. To teach kids to be responsible about money you have to first teach them how to be responsible period. You can start as early as two years old to teach children how to make choices. Making choices is a part of life and a big part of learning how to handle money. You can start by teaching kids the concept of, you have to choose from two or three items and you can only have one for now.
If you don’t start the process of making choices early in life how do you expect a 16 year-old to understand that they can’t have both a laptop and an I-pad. Especially if all their life you have given them what they want, when they wanted it. I remember when my kids were younger and we would be shopping and one of them would say “Dad can I have this?” my response to them would be “we do not have the money for that today but if you save some of your money then perhaps we could come back and get it another day”
Let them have skin in the game – It is vitally important that you allow kids to participate in the purchasing process especially if it is something that they want. I have learned that humans, particularly kids are very impulsive. If they see something that looks cool then they want it, no matter what. Like anything else in life we tend to be a little less careless when we have something to lose. If there is something that your child really wants you can test how bad they want it when you make them use some of their own money rather than using yours all the time. I remember when my oldest daughter wanted an electric toothbrush that she had seen on one of our trips to the store. She pleaded with me to get the toothbrush and that she would pay me back with she got her allowance.
I told her “why don’t we wait until you have enough money to buy the toothbrush and I would gladly bring you back to the store to get it.” Several weeks later, after saving her allowance my daughter finally had enough money to purchase her $10 electric toothbrush. We get to the isle where the toothbrushes were and I asked “do you have your money” my daughter looked at the money in her hand and she stared at the toothbrush for a long time. Finally after about three minutes of thinking she said “Dad now that I have some money I think I want to wait and get something that I really want. I already have a toothbrush at home” PRICELESS!
Work = Money – This concept is quite simple, we must teach our children that money comes from working for it. I know I spoke of an allowance earlier in the article and that is something that my mother has chosen to give my kids. For me I choose to let them earn the money to buy the things that they want. There are certain chores that have to be done and my kids won’t get paid for them, like keeping their part of the house clean or folding their own clothes. However I have set aside a short list of other chores that my kids can choose to do and earn some extra cash. The list doesn’t have to be complicated something simple like sweeping up my man-cave (garage) or helping me with a project around the house. The important thing here is to help kids make the connections that you have to work in order to earn an income, nothing is free!
Develop good money habits – Where you are today financially is the result of the decisions that you have made and the habits that you have developed up until this point. To get kids on the right path you have to help them develop good habits early in life. If you were taught to save at an early age then it won’t be hard for you to understand the concept when you are an adult. Good habits lead to good decisions and good decisions lead to prosperity and the opposite is true about bad habits.
Look at where you are financially and compare that to the habits that are a part of your everyday life. If you have made good decisions and have developed good habits then you are probably in a good spot financially if not then – I don’t have to say it do I? There is no secret to raising money smart kids; it’s about making the effort to make sure they understand how money works early and often.
This article was written by Lonnie R. Mathews for the Who's Minding Your Money blog. Lonnie is an author and speaker in the area of personal finance. To learn more about Lonnie or to contact him visit www.lonniemathews.com
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