Money is getting into the hands of teens and children at a younger age than ever before. Beyond allowance from parents, kids are gifted money for birthdays or Christmas and earn it for doing chores and part-time jobs when they are old enough to work.
In fact, I always remind my mom and other family friends not to give my kids too much money as gifts whenever they can’t think of any tangible gifts to buy for special occasions. After all, my young kids don’t need hundreds of dollars every single year to spend on toys. It doesn’t teach them anything and the generosity will probably make them think that money just lands on their lap just because they are them.
With this trend comes the increased concern that kids are handling money before they are taught how to handle it wisely, or are never taught at all. Considering the major pitfalls that can result from financial ignorance or irresponsibility, it’s vital to ensure children are being taught how to manage money at an early age. Besides making money management a regular topic of conversation with your children, here are some ways to help your kids grow up to be financially responsible adults.
Don’t assume they’ll learn money management in school. Kids are taught mathematics and economics in school, but one element which is largely omitted is personal finance. I wish schools will incorporate everyday applications into their math lessons because it can only make the topic more interesting. I guess the school system figured that even if kids are taught the basics of budgeting, loans, interest, credit rates, and investments, these concepts will just be much the same to them as the algebra they find no practical application for.
That’s why children and teens need involved parents to help them apply financial concepts to their everyday lives, both in the present and the future.
I always try to tell my kids how our money is spent and how much everything costs. Aside from teaching them that everything costs money and that they should take care of their possessions more, it also teaches them how real-world finances work. Doing so also gives them a reason why math is actually useful, which helps parenting be easier when it’s time for homework.
Teach kids responsibility by giving them the opportunity to make financial choices. Kids aren’t going to be deciding whether or not to delay bill payments in order to buy a flat-screen TV, but they can learn to make choices and deal with their consequences on a smaller scale. If they have a set allowance or, in the case of the very young, a handful of quarters for the candy machines, let them experience the reality of spending all of their money. Parents who offer their kids a bottomless money bag aren’t doing them any favors; when they’re adults, there won’t be anyone to bail them out of their financial blunders.
Rather, the experience of learning to make choices with a set amount of money will teach them to value their purchases, learn their priorities, and instill a respect for delayed gratification, all of which will make their future financial management less catastrophic. Poor choices made by an 8-year-old are much easier to learn from and correct than the debt-racking and credit-score-dropping mistakes of a 20-something.
Here are some examples. One time, my son made a huge mess on the carpet that took a good 20 minutes to clean up because he was being careless at the diner table. Instead of giving him a scolding and cleaning it up myself, I asked him to clean it up himself or buy me a coffee if he wants me to help him do it. He chose to pay $5, which taught him that you can hire help if it’s being offered.
Another time, I even asked him to buy us toilet bowl cleaning products. I told him that if he were to buy the liquid and then clean everybody’s toilets, then I can get him a copy of Minecraft, a video game he really wanted. He compared the $4 cost of the solution versus needing to buy Minecraft himself for $26.95, and he opted to help out the house.
“Do What I Say, Not What I Do.” Whether or not you are actively teaching them, your kids are learning volumes from you every day, simply by watching what you do. It’s fruitless to teach your children financial responsibility if you’re not practicing it yourself and giving them a living, breathing example of how it plays out in the ‘real world.’ This doesn’t assume you will always make the right choices or be the perfect example of wise financial practices; we all make mistakes and have financial scars in our past. The important thing is to communicate with your kids about your own financial decisions, both good and bad, and how they have affected your life.
It starts with the tiniest of things too. I tell my kids to turn off the lights whenever they leave the room, but they would never care to remember if I myself never turn on the lights. We moved eight months ago and I would always go around the house turning everybody’s light off. After a while and continually reminding my kids to do the same, my daughter started doing it and started asking my son to also do the same.
Nowadays, everybody uses their lights when they need them and always remember to turn them off when they are doing using them. Same thing with finances. Once you get used to being more conservative and not spend willy-nilly, then you don’t think much about it and just do it.
Your kids look to you, more than anyone else, to teach them how to be financially responsible. Even if they won’t always agree with your practices, you will be instilling in them principles that will allow them to succeed in multiple areas of life.
Don’t just talk the talk but not walk the walk!