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One thing parents know for certain, they don't want their kids to make the same mistakes they did. That's especially true for money mistakes.
Most of our money mistakes are due to lack of education. Did your parents take time to teach you about how money works? Even if they did, you've probably discovered some holes they glazed over and thought in disbelief, How did they forget to teach me that? You can stop that cycle by teaching your kids—no matter what age—how to handle money with success. Here are a few tips:
Embrace the Process
When you start out educating your kids about money, understand that it will be a process. In your early lessons, you'll teach your youngster the value of working and saving by paying him for small jobs, like cleaning up his toys. Congratulate him with lots of high-fives and pay him immediately. Keep it visual by wadding up a dollar bill and putting it in a clear container. That way, he'll see how his money adds up as he's paid for doing his jobs.
When your child is old enough for chores, around five or six, start paying commission—not allowance. If he does the work, he gets paid. It's a great way to teach personal responsibility. At this point, help him learn basic budgeting skills by dividing his money into saving, spending and giving categories. Financial Peace Jr. includes colorful envelopes and charts to make this fun!
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Open a checking account for your teen and teach him how to balance his checkbook. If he's earning money at a part-time job, encourage him to continue budgeting to spend, save and give.
As he moves into college, find a balance where you are there to hold him accountable, while also allowing him to make some mistakes so he knows what that feels like and learns from it.
- Make sure he's continuing to balance his checkbook,
- Discuss any large purchases he's thinking about making, and
- Even though credit card companies have to follow stricter laws when they market to college students, they still prey on them in more creative ways. Make sure your young adult understands the dangers of credit cards and why he should never have one.
Healthy Habits, Healthy Finances
Some kids will go to extremes with their money. Extreme spenders may need to learn the value of money by setting savings goals and working to meet them. Extreme savers often operate out of fear and need to learn that it's okay to spend and give. Even extreme givers have to find a balance so they learn to support themselves without giving all their money away.
As a parent, you may have to learn some new habits as well. If you buy your kids whatever they want, you're not teaching them to be anything but spoiled. The world doesn't work that way, and they could end up living in your basement when they're 35 if you don't set limits and say no once in a while.
When your kids spend their money, you don't have to allow them to buy the latest junk they see advertised on TV. Part of being a good money manager is making wise purchasing decisions. And you have every right to deny purchases of music, video games, etc. you don't approve of.
For all your efforts, what will you get? You'll get a responsible adult, who knows how to manage his money, how to live on what he makes, isn't afraid to work, and has a generous spirit. In other words, it's totally worth it.
What advice do you have for parents in this process? Leave a comment below!
Check out Dave's resources for kids, teens and young adults to help them practice responsible money management throughout life.