Teach Your Children WellJune 26, 2012 • By Candace Bahr and Ginita Wall, CPA, CFP®
Giving your children the gift of a financial education will pay off year after year.
Of course, teaching your children about money goes beyond practicing their math skills with your change purse. There are 10 basic areas in which your children can learn about money, and how it works in their lives.
Teaching Children Responsibility
- Model good behavior, since your child will do as you do and not just as you say.
- Let your own word be your bond: It’s better to promise something small or not at all than to promise something wonderful and not deliver.
- Encourage independence. Allow your child to handle as much responsibility as will challenge and motivate her.
Teaching Children Good Work Habits
- Teach time management. Show your kids how to break projects down into smaller pieces that can be accomplished step by step.
- Make work a social activity. Teach her to enjoy doing the things necessary to keep herself clean, healthy, financially secure and learning.
- Don’t take over if your children shirk their responsibility. If your child takes on a household chore and is unwilling or unable to perform, teach them the consequences of their inaction.
Teaching Children Enterprise
- Develop your child’s computer literacy. Give your child a project to research on the Internet, such as a large purchase or a family vacation, and allow plenty of time to complete it.
- Help your child create her own business. A baby sitting, lawn care, or pet care service can teach a child a lot about finding customers, collecting pay and keeping records.
- Read and tell stories about people who have achieved big dreams, pushed the limits of the known world, or transformed the economic structure of our lives.
Teaching Children Charity
- Encourage your child to volunteer. Your child can work with animals, be a candystriper at the hospital, or contact a business where she’d like to work and offer to be a non-paid intern.
- Teach charity by example. Make charity a regular family ritual, whether it’s Thanksgiving Day at the homeless center or a regular trip for Meals on Wheels.
- Teach your child to give the gift of love. Non-monetary gifts are appreciated, especially by family, so encourage your child to make relatives a gift or provide a service.
Teaching Children Objectivity
- Discuss politics and economics openly in your home. Have a debate on a candidate’s position or a ballot initiative.
- Keep your child focused on what’s important, and not to be too impressed with status. Wealth is not about wearing someone else’s name on your clothing or owning the coolest gadget.
- Reverse roles with your child. Next time he wants the latest toy, ask him to assume your role. Would he buy the toy for you? What else could he do with the money?
Teaching Children Cooperation
- Make your family money meetings exciting. Make popcorn, display a flipchart of family financial goals, or pay out interest on your younger children’s savings at this time. Money can be a game, not a chore.
- Teach your child to think “win-win”. When conflicts arise, ask her, how can we settle this dispute in a way that satisfies both of us? What do we each really want?
- Make your child aware of the portion of the family budget that applies to him. Rather than telling a child we can’t afford that, it might be better to say we’ve allocated $50 to that category and we’ve already spent that this month.
Teaching Children Basic Money Skills
- Teach young children the basics of money. Make sure your elementary age children know the difference between the denominations of money, and that they know how to count their change when they buy something.
- Talk to your child while shopping. Explain how discounts work, let your child see how coupons will save money, and teach your child to comparison shop.
- Let your child observe the negotiation process. Next time you buy a car, ask her opinion of the value, what tactics to use, and how to get the best deal.
Teaching Children Wise Saving and Spending
- Put savings first. Once your child has determined how much money to save from his allowance, make sure he sets the money aside first, and only spends what’s left.
- Help your child make lists. Together you can make a shopping list for the school supplies she needs, or the holiday gifts she needs to buy.
- Let your child make mistakes. If your child runs out of money, don’t bail him out. If you bail him out now, he’ll expect much bigger handouts from you when he becomes an adult.
Teaching Children Personal Finance and Investing
- Look for personal finance classes at your child’s school. These classes can greatly help children improve their understanding of money and the role it plays.
- Make the concept of taxes real. Explain the hidden costs that taxes add to the economic system. Show your child how much the gasoline tax adds to the cost of gas, and how much sales tax adds to the cost of the toy. Where does the money go?
- If you are an investor, share your knowledge with your child. Teach your child how to read the stock quotes in the newspaper or how to look them up on the Internet.
Teaching Children Financial Decision-Making
- Start allowances early, around age 5 or 6. Don’t let your children get in the habit of asking you for cash rather than choosing responsibly how to save and spend their own money.
- Teach children how credit cards work. If children know how the cards work before they get one, they may be able to handle the responsibility better than teens who get a card and know nothing about them.
- Start a family Money Club. Your older teens may benefit from being included in a Money Club where they can report to other family members about money issues and help make group decisions.