I’ve tried to gradually teach my son about money, ever since he was a baby. It was difficult in those early years, because the sticker shock I had when I saw the cost of formula, baby food and diapers left me with little to show anyone.
Fortunately, I’ve been able to stimulate my own economy by working to reduce debt and striving to increase my income. During this time I’ve made a point to show my son the ups and downs of finance. Explaining a budget to a four year old takes creativity. The concept of value in regards of money is foreign to them.
So how do you teach your kids about money? I will be the first to admit that I’m not financial expert and far from financial stability, but I’m getting there. What I’ve strive to do is ensure my son has a firm foundation and understanding of money and how to use it at an early age.
The biblical philosophy that is found in Proverbs 22:6 that says, “train a child in the way he should go, and when he is old he will not turn from it” is wise. As the son of a minister I find myself referencing the Bible and the examples of my parents often in my journey as a parent. So why shouldn’t I apply that same principle when it comes to money?
Now I’ve used the opportunity to accomplish two things. Teaching my son how to count and the value of earning, saving and managing money. When I’ve made unwise financial choices I’ve openly admitted the mistake and tried to explain it to him. Fortunately those mistakes haven’t been drastic, just an illustration of what happens when you deviate from your budget.
So how do you teach children about money?
I suggest making it simple and fun. When I pay the mortgage or electric bill I sometimes ask him to help me. I tell him to get my check book, interestingly enough he knows where I keep it. (I need to make a mental note of that.) Then I show him the statement and ask him how much do I owe? After some guidance of what number to call out to me he sees me write the check out. If that was all there was to know we would be cool, but here’s where the learning begins.
I show him how much money I have in my account. My wife hears me complain about the cost of stuff, but that’s another subject. I try to make it easy and use examples that he can relate to. He’s only four, so the whole adding and subtracting thing is not perfected yet, but he’s catching on.
My objective is to expose him to it, teach the concept of how we should use money and be honest with him about the mistakes I’ve made. As a kid, teenager and even early adulthood, many of us was not taught much about money, but to use it to get what you want or need. Very little was taught about saving, investing and management until we find ourselves trapped by debt. I believe that my job as a parent today is to steer my children away from the traps that snagged me. I plan on becoming a millionaire before I leave this Earth, and I want him to be wealthier than me earlier and longer.
There are so many tools available now that helps parents teach their kids about finances and offers kids creative and useful money saving skills. As a father of one and another to come later this year I am determined to direct them in the way they should go and pray that they don’t turn from it. It’s not easy, but we can not sit back and allow our children to make the same mistakes that we’ve made or continue to make.
Here are some useful resources and articles about teaching children about finances. Enjoy, and if I learn of an easy way to make millions I’ll be sure to pass it along to you.
- Allowance. Pay allowances at fixed and regular intervals, and define each child’s financial responsibilities. Kids will generally learn more about money if they actually have money of their own to spend and save. One rule of thumb is weekly allowances of $1 per year of age.
- Saturday job auctions. Give your children the chance to earn extra cash by doing jobs beyond their expected chores. Award jobs to the lowest bidder as part of a “Saturday Job Auction.”
- Money jars. Help children divide their allowance or earnings into four jars-charity (10%), quick cash (30%), medium-term goals (30%), and long-term goals (30%).
- Savings and checking accounts and credit cards. When your child is mature enough, help them open a checking and savings account and teach them how to balance a checkbook. If your teenager is financially mature enough to apply for a credit card, find one that allows you to set the spending limit and receive a monthly statement of your child’s purchases. Review the monthly statements with your child and teach them the importance of paying the balance each month.
- Stock investments. Help children learn about the ups and downs of the stock market early in life. Then they will most likely be more comfortable with investing when they are adults. Give gifts of stock in companies your children are familiar with to encourage them to follow the stock market.
Forever Families – “Teaching Children Money Management Skills”