One thing that I really enjoy doing in a financial plan is to get the kids involved in some way. It may seem like a strange concept to get kids involved into a financial plan, but it’s a great way to teach kids not only the fundamentals of money, but responsibility as well. An extra bonus I have found is that the kids often can keep their parents in line when I’m not around.
Why teach kids about finance
Listen, first and foremost, I am not telling anyone how to raise their kids. I’m just giving my honest perspective from when I was a kid and what I learned (or didn’t learn) while growing up. Education and knowledge is power so empowering your child with financial knowledge will last a lifetime. If they can count then they can start learning about money.
What you’re teaching them about money (and I bet you don’t even know)
One thing I know many parents want for their kids is more than what they themselves had growing up. Recently, that has translated to giving their kids everything they want, consistently saying yes, and rarely saying no. What this looks like on a consistent basis is wanting to go out with friends, having the newest phone, latest fashion, the new game console, or even paying high insurance cost because of irresponsible activity. When you constantly cave on a kid’s wants & desires it creates a sense of entitlement and gives them an unrealistic view of the world. If they ask then they receive and don’t have any ideas of what it means to earn something as well as they are not accustomed to hearing and responding to the simply “no.” Another factor to consider is if kids don’t learn the importance and value of money, they are going to rely on you throughout their adult years when things get tight. That can be moving back in because of large student loans and/or over inflated sense of entitlement for a prestigious job they’re not ready for. Also when retirement comes around for you, you may not be ready to retire if you’ve spent much of your money on your kids through their adult years.
How & What to teach kids about money
It’s going to always depend on the age of your child, but the earlier the better. This is a great website by President’s Advisory Council on Financial Capability that has easy ways to teach kids based off their age, so it’s a great starting point. It gives you easy ways of how to get kids engaged in everyday financial activities. The easiest thing I tell parents is to be honest one how you spend money when you’re out shopping. Say “We’ve only got $xxx to spend on Halloween. We can’t go over or we won’t be able to do y. If we spend less we can put the rest in our Disney vacation fund.” Be specific, simple, and most importantly explain the consequences as well as a reward for staying under budget.
Communicate, Communicate, Communicate
If you have goals you want to achieve as a family, let the kids know what those goals are and what they can do to help. Just like in the previous example, be specific on the goal as well as how they can help, simple in the instructions, and (this is especially important for kids so pay attention here) let them know what is in it for them. At first you want to keep it simple with 1 goal to have the kids engaged in. Once they get that down you can add more goals to their scope.
Allowance – Setting Goals & Giving Them Responsibility
Many times I get “how much is a good allowance for my kids” or “when is an appropriate age to give kids an allowance?” You may be tired of hearing this from me but as usual it depends. You really should talk to a professional because it’s going to depend on your own budget first and foremost when it comes to an amount. Also, you may find more creative ways to “pay” them for the duties you give them. Whether it’s more game time or TV time, or an upgrade to a phone or electronic device, you can find a way to give kids responsibilities and then properly reward/pay them for a job well done.
Age is going to be a parental call. Personally as soon as they can count I would give them some responsibility and then rewarding them for a job well done in some way.
Financial Chat
If the child can say “I want…” then BOOM, that’s the best time to talk about money. Give them a simple lesson of having to pay for things they “want.” If they want to acquire the things they “want” there have to be trade offs. They have to save up for those moments either through direct allowance or getting chores done around the house to help pay for those “wants.”
So what is your experience of teaching kids about money? I’d love to hear from you!
Until next time my wonderful networking partners!
