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We didn’t make wise financial decisions early on as a couple and now that we have kids we don’t want them growing up and making the same mistakes. How should we begin to teach our kids about managing money?
According to Charles Schwab & Company’s recent online survey, many parents wished they had learned more about budgeting, saving, and investing when they were young. Over half (57 percent) said they wished they had learned more. You have a window of opportunity to do more for your children than pass on the familiar parent refrain, “Money doesn’t grow on trees.” Dave Ramsey noted, “We’re raising a whole generation with ‘sucker’ stamped on their foreheads because we’re not teaching them.” The best way to prevent that from happening to your kids is to begin teaching them about money now.
Where to Begin
Money is a topic many parents avoid. Some think children don’t need to be concerned about something that is a grown up matter. Others find it hard to approach the subject due to their own lack of knowledge and confidence about financial matters. Whatever stands in the way of preparing your kids for life in the real world must be overcome.
Begin by modeling good financial practices for your children and make talking about money matters a common event. The dinner table provides a great place to talk. For many families this is the only time the whole family is gathered together on a regular basis. Talk not only about the success stories, but also the struggles you’ve had when mismanaging money. Children can learn from our good example and from the insights we’ve gleaned from making mistakes. It will be tempting to protect your kids from these struggles, but we don’t think that’s wise.
Encourage Smart Spending
An effective way to show your kids the ropes is to give them some responsibility for managing money. An example could include handing over the costs of their clothing, school supplies, or discretionary spending. Map out a budget together and let them handle the details of how, where, and when the money is spent. Of course you will need to take into account what is age appropriate. As they get older, hand over more responsibility. Giving responsibility to your kids for managing a small amount of money is the best way we have found to prepare them for managing more money later.
When our children were about six and eight years old we decided to hand over responsibility for certain budget areas of our vacation. We took care of transportation and lodging, but they were given responsibility for their own food (when we ate out) and fun money. Bev and I calculated what those two areas would cost and then provided them with a budget. Their response was incredible. Yes, they used some money in ways we would not have advised. Amanda spent some of her fun money on a toy that was never used after it left the store. But overall, they stepped up! To conserve money, they ordered water to drink and soon got the idea it would be cheaper if they shared a meal. When we wanted to eat at a nice restaurant, they didn’t because “it would cost too much.” The secret to their penny-pinching was that we told them they could keep whatever money was left in their budget at the end of our vacation. Children learn more by doing than by listening to us lecture.
A helpful resource to use when teaching your kids about money is Financial Peace Jr.: Teaching Kids About Money! (Lampo PR, 2003), for ages 3-12. The kit includes three envelopes. All money that gets into the hands of your kids, whether allowances, gifts, or earnings from doing chores, goes into these envelopes. The Savings envelope teaches children the importance of saving for future use. The Spending envelope lets kids still be kids and enjoy the benefits of having saved money. The Giving envelope teaches children that giving is a part of life. Whether you purchase a resource like this or simply create your own envelope system, make use of the many resources available to help you accomplish your goal of raising kids who are smart about how they manage their money.
Send your questions about family life to Phil and Bev Haas in care of The Lookout, 8805 Governor’s Hill Drive, Suite 400, Cincinnati, OH 45249, firstname.lastname@example.org.We regret that personal replies are not always possible. Phil and Bev Haas are involved in education and family ministry in Cincinnati, Ohio. They are the parents of two children, and they have one grandson.