No matter how old or young, your child needs skills — skills to survive in the world, skills to provide for themselves and their future families, skills to reach up to embrace life fully without allowing the temptations of the world to drag them underground.
In our home, we’re passionate about teaching the lessons we’ve learned about money through the context of our failures (hello $127,482.30 in debt) and successes (wahoo for paying it all off).
Knowing how to teach kids about money will equip both you and your children for the days ahead. The topic was so important, I included an entire chapter in my book “Slaying the Debt Dragon” to provide readers with plenty of practical tools and ideas to help you in this tricky area of parenting. Here are some guiding principles to mentor your kids in money management.
Be honest and casualLet’s face it, your kids probably already know about your struggles in life. Whether you overspend or are consistently late, your habits aren’t going to shock them. Share where you are financially. For us, this meant talking to our then-kindergartner (who is now 13) when we began our journey of paying off debt, explaining in age-appropriate terms about how we planned to scale back our lifestyle for greater goals. I’m not sure she fully comprehended it; however, the mere practice helped create a culture of openness in our home.Even if your kids don’t know what’s going on with your finances, they will pick up on your stress levels and passive aggressive behavior with your spouse.
A child might jump to the conclusion that the state of your personal finances is much worse than they actually are. You also don’t have to have a family summit, laced with formal language and a boring professorial lecture. The more natural the conversations, the more likely the lessons will stick.
Talk about how much things cost
Candy bars, cars and college educations all come at a price tag. You might be surprised at how little even big kids know about what each of those items cost. Ask what your kids think certain items cost. It’s at minimum a fun game to play. Help point out the cost of items you see throughout your day.Use everyday experiences to teachThe best lessons are typically the simplest. Let your kids help pay the bills. Show them how to write a check. Talk about financial words — the difference between debt and debit can be a big challenge for many kids.
Take your kids grocery shopping, share your budget for the week and have them help you stay with in those bounds, allowing them to help keep a running tab of what you’re putting in the cart. At age 9, our oldest daughter planned her entire birthday party, managing the budget and choosing what she wanted to do, how to decorate, and even what we would eat based on agreed upon amount. She loved the pursuit of keeping costs low (especially since we promised her leftover funds would be hers for whatever purpose she chose).
Help them manage their money
We’re big fans of the three envelope system for our girls. Both have a “Give” envelope where they put 10 percent of all their money (birthday money, odd jobs around the house money, grandparent coins, etc.). They also have a “Save” envelope where they put 10 percent. And finally the remaining 80 percent goes into the “Spend” envelope. We set short-term and long-term savings goals. The Princess Eldest has been saving for a car for a couple of years already, knowing we’ll match what she saves up to a specific dollar amount.
Constantly complaining about your financesLook, I get it. You’re stressed about money; and let’s be honest, there are several times when we just want to reply “Because we can’t afford it! That’s why!” But your attitudes about money are inherited. Hopelessness, lack of control, lack of planning — all can be passed along to your child. Wouldn’t you rather give a legacy of generosity, contentment and careful budgeting?Saying yes or no too oftenSo this is a tricky tension for all of us to dwell in. Constantly say “no” and you’ll create a wild beast indulging in everything once beyond your protection. Say “yes” every single time and you’ll foster an equally ugly monster with no limits. Choose your moments to bless your children, and know when you must restrain. Be the parent and help guide your kids along the path.
Being a credit card survivor, I’m never going to tell you using one is a good idea. But even debit with small children may send mixed messages about where money comes from, as well as its worth. Whenever you can, opt to use cash to make your purchases. Involve children in counting coins and bills and remind them that the money is a result of work and doesn’t just appear out of the ATM like a genie pops out of a bottle.
Thinking they’re too young
However, thinking your child is too young to understand budgeting or managing money is a big no-no. After all, budgeting is simply money in, money out. Anyone can understand that if you don’t have something, you can’t spend something.They won’t grow up too fast or miss out on the miracle of childhood. Give them a little credit.