Children don’t usually learn money management skills in schools, but don’t think that means they don’t learn about money. Children are like sponges. They soak up everything they can at an early age, and learn much more than we’d like from example. This is why positive role modeling is so important. It’s also why you’re teaching your children about money whether you mean to or not. It’s important that parents realize that they should be actively teaching their children about money. At least that way they may learn the right lessons.
I know many parents who feel that discussing money or finances with children is taboo. This fact alone speaks volumes about the parent’s view of money. Parents teach their kids important life skills like walking and talking, looking both ways before crossing the street, and not to play with matches; why not teach them about money? Maybe these parents feel that they themselves don’t know enough. What better opportunity to learn? You don’t need to be Einstein or have a degree in calculus to understand saving, and spending less than you earn. It doesn’t take a high degree of business acumen. It takes time and effort. You may surprised how much less effort it takes than you thought.
Start Early: The right time to teach children about money is now. Start them as early as possible, since it’s easier to learn good habits than to unlearn bad ones. The financial decisions we make early in life carry a heavy weight over time. Learning the right skills and making good decisions early in life can mean a smoother financial road ahead, but lack of a financial education leads to poor decisions which can weigh a person down and hold them back for a lifetime. Do your best to help your kids learn from your mistakes early enough to avoid them.
Baby Steps: Start small and build from there. At a very young age, children can grasp the fact that you can’t simply take what you want from the supermarket and go home. They notice that you have to go through the checkout and hand the cashier something – explain what that something is. Or maybe your child wonders why you go to work everyday. This can be especially hard for parents who wish they could stay home with their children. I know a lot of working parents feel immense guilt at leaving their children every day to go to work. Explain to them that you do so to make money, so you can buy food to eat, clothes to where, etc.. It will turn you into a heroic figure in their eyes.
Early money lessons can be focused on where money comes from and why we can’t always get what we want in life right when we want it. This then leads to saving, budgeting and how to make smart purchases. Eventually, children can learn about investing and building wealth for later in life, so they won’t become a burden on society (or their parents).
Get Involved: To make lessons more effective, put yourself in your child’s shoes. Remembering how you thought and felt about a given situation at his age can give you a perspective that will make what you say more meaningful to your child, and ultimately help the lesson stick. Also be sure to engage your child in the discussion. Ask his thoughts on various, age appropriate topics. This will not only help you to gain a perspective of your child’s viewpoint, but it will also help keep him engaged in the process.
Practice Makes Perfect: I’m of the opinion that chores need to be done as part of the general household responsibility. But an allowance should be based on some sort of work or service above and beyond the basics. This reinforces the idea that money comes from work and not from trees, but it also allows for further lessons. The child will learn to make a choice of working more to be able to afford that video game he wants, or deciding it’s not worth the extra effort and learn to be content without the game. In the end though, an allowance gives the child something real to use. This opens the door for active decision making and lesson learning. They will make mistakes, but that’s part of the learning process.
Carpe Some Diem: Use the moments given to you as teachable moments. My family and I were recently at a local orchard when my 4 year old daughter asked why we need money to buy apples. I could have said, “because we do”, but that would have been a wasted opportunity. Instead, I told her that we give money to the people who own the orchard because they did all the work to plant the trees, make the apples grow and pick them for us. In turn, the money we give them for the apples allows them to buy food and clothes for their family.
Raising children is really about raising adults. The behaviors and skills we learn as children have a huge impact on how far we will go in life as adults. Children who learn money management from credit companies, and how to live beyond their means become a burden from the rest of society, and will never experience life off the pay check to pay check treadmill. Why wouldn’t we want to talk to our kids about money?