Unfortunately, money management does not fall under the curriculum taught in school. Parents are responsible for leading by example and teaching the basics of money management. It may seem like a daunting task, because most people do not remember how they were taught about money, they just know it now. That’s why I put together this list in order to give you ideas on how to start raising money-savvy kids.
Talk About Money
The first step in teaching your children about money is constructing an ongoing, open discussion about money. Talking about money is something we don’t normally deem acceptable. We do not disclose salaries, we try not to lead onto how much we have, and we certainly do not ask other people about their money. These social norms have their place within our society and it’s important to stress that to your children as well. There’s a time and a place for everything. When it comes to money, let your children know they can talk to you about it, ask questions, and not fear making you uncomfortable.
Budgeting is a huge part of money management. Keeping track of spending and setting restrictions on yourself is a great habit to establish early. Budgets are hard to implement after bad habits are formed, so to avoid forming them, budget together. You can be as open about this as you’d like. If you want to be completely transparent and work on the household budget, go for it! If that seems too daunting, work on a personal budget with your child. Have them outline goals and also learn how to work with the income (allowance) they receive.
Utilize Teachable Moments
There will be many teachable moments throughout your money management lessons. Identifying them and knowing how to come out the other side with a lesson is a great way to further instill all you both have been working towards. There are opportunities for real world application everywhere. Include your children in on the family grocery shop. Explain how much you plan on spending and how you came up with that number. Then work together to stick to it!
Use Tough Love (even when it’s hard)
Tough love is a necessary evil when it comes to learning about money. You more than likely ran into some financial trouble at one point or another. After you recovered and stabilized your finances, you learned a valuable lesson about what not to do. Providing children with these realizations early on can firmly cement your teachings into their minds. They may have to find out the hard way that it wasn’t a good idea to blow all their money on a toy the day they receive their allowance. Your child won’t even learn that lesson until a few weeks later when they do not have enough money for something else they desperately want. By not giving in and buying it for them, you’re practicing tough love so they can learn a valuable lesson.