Ten Things Parents should Teach their Children about Money

The easiest way to teach children the value of money is to borrow some from them.
Anonymous

While humorous, this quote is all too true. Experience is often the best teacher. However, as responsible parents, we do not want to see our children go into the world blindly. Mastering the art of handling money is a lifelong process but we can ease the pain by instilling values in our children while they are young. Just remember that children are more likely to listen to your words of wisdom if you practice what you preach.

While they are still coloring on the walls:

1. Make your child’s first gift from you is a piggy bank.

A child’s most impressionable years are the first 5 years of his/her life. It’s easier to instill and practice good habits earlier than later.

2. Take your child to the bank with you.

Let your child see you put money into your account. This helps them to become familiar with the system over the years. Most bank tellers offer small children candy for good behavior. This nurtures the concept of putting something in (money) and getting something in return (treat). When your child gets a little older, have him/her open a savings account with the money he/she has saved in his/her piggy bank. Show them the statements each month so they understand that their account is accruing interest.

3. Explain that necessities come first, then toys.

When your preschool asks why he/she can’t have a toy now, explain that Mommy and Daddy have to make sure that all the family’s needs are taken care of first. Take the opportunity to explain the difference between wants and needs.

Once it’s no longer cool to be seen with Mom/Dad in public:

4. Tie allowance to chores.

Make sure your child doesn’t think he/she is just entitled to an allowance. Be a stickler about this one. It teaches your children the value of a dollar and will help them curb their spending habits. Encourage them to save but do not force them to do so. This will only breed resentment towards the idea.

5 Teach your preteen how to shop for groceries conservatively and how to cook.

This step will save you and your child hundreds of thousands of dollars over the years. Ask you son/daughter to sit down with you and do the math. Encourage them to go the grocery store with you. Allow them to plan one meal a week. By teaching your child to cook without being wasteful, you have taught him/her how to save money, feed their family (should they choose to have one, one day), and you have given him/her the opportunity to have an active role in the family. The act makes them feel more included in a decision making process.

6. Include your preteen in family budget conversations.

One of the biggest mistakes that families make is to shelter their children from their financial situation. While I do not agree with telling your toddler “we’re broke”, I do think that it is important that your older children witness the budget making process. Openly discuss how to plan to pay the mortgage, electric, and insurance on time. Show them what the fixed priorities are and how to monitor the variable ones.

Once the teenage hormones move in:

7. Open a prepaid debit account for your teen.

There are numerous programs and banks out there that offer programs to encourage teens to learn about banking (Visa Buxx, etc.). You can monitor how your teen spends his/her money in these accounts. Deposit their allowance onto the card. Encourage them to create a budget based on “their priorities”. Explain to them that they are responsible for balancing their account (the benefit of these programs is that they can’t spend what’s not there). It gives them more room to control their finances while not giving them enough rope to hang their self.

8. Show your teen your credit card statement.

Explain the concept of APR. What is it? How does it work? Show them the fine print at the bottom of the page. Encourage them to do the math. How much would they pay in interest if they bought that awesome jacket on their credit card? How long would it take them to pay it off if they only made the minimum payment? Hopefully they will get the idea.

9. Teach your teen how to fill out a 1090 tax form.

This will literally save them thousands over a lifetime. With all of today’s technology available to the general public, there is no reason your 18 year old should be paying someone 100 bucks to fill out a simple form online. E-file is free. Just read the instructions and follow the prompts. This allows them to see how much of their earned income actually goes to taxes. It may encourage them to be more active in local politics.

10. “It’s good to have money and the things that money can buy, but it’s good, too, to make sure you haven’t lost the things that money can’t buy” – George Horace Lorimer

Never let money become more important than family. Your child needs to learn how to make money work for him/her and not the other way around. There are things that money cannot buy. It is important that we all remember that.