How to Teach Your Kids About Money

February 2nd, 2011 |

It is always smart for a parent to live by example and teach their children how to be responsible with money. Unfortunately, most parents don’t take the time to talk to their kids about money. And even more unfortunate are the kind of parents who don’t know how to handle their own money in the first place and are teaching a poor example of not budgeting and blowing money on frivolous things all the time.

This also gives parents a chance to teach their kids financial principles they may never have seen in the prosperous years they have been alive. Here we will discuss ten principles for teaching children about money.

Talk about money. Every time money is involved, parents have a chance to teach their children the values and analysis behind their actions. Money should never be the primarily topic of discussion, but it is one of the most important topics through which we communicate our wisdom and values to our children.

Every purchase, investment, or donation can be a time to teach your children something about your values. Talk openly about money. Parent makes a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost.

Hiding this information robs children of the financial education they need. Talk factually about money. Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children.

Instead of helping children, they can cripple children from growing to make sound financial decisions require chores; pay for optional work. Everyone in the family has to help complete the work that needs to be done.

If you want to pay your children, only pay them for optional work they can choose to do or not to do. Provide children an allowance they can make real choices with. Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions.

Consider giving them an allowance large enough so that they can purchase some of their own needs. This doesn’t mean paying your child $50 for doing the dishes or mowing the lawn. Make sure an increase in allowance is followed by an increase in the work they do.

Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values. Help children prioritize purchases. Ask them if this purchase is better than other purchases they are considering making. Help children comparison shop.

Help them consider issues such as cost, quality, and convenience. Require children wait before making large purchases. Adults should wait at least a month whenever they are making a large purchase. Children shouldn’t be expected to wait that long.

Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week’s allowance). There is always tomorrow and over half the time they won’t remember what attracted them to it in the first place.

Developing this habit will help make them resistant to impulse buying. Don’t use money as a punishment. Your priority should be helping to give your values to your children, not buy their outward behavior.

Don’t loan your children money. If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are If they want it, they have to save for it. If you want them to have it, you will buy it for them.

Loaning your children money for items they want teaches them they aren’t responsible and they don’t have to prioritize. And this also teaches them to spend money they don’t have and will be more susceptible to credit card offers that they will start getting once they turn 18.

About the Author

Jack R. Landry has a PHD in financial services and has written hundreds of articles relating to consumer services and payday advance loans. He has been a consumer advocate for nearly 25 years.

Contact Info:
Jack R. Landry
JackRLandry@gmail.com
http://www.checkcity.com