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Beyond Piggy Banks: Teaching Your Kids About Money

Posted on 31 August 2015 by admin (0)

Last week I sat down with my son Glen to do an online search for a new printer. We found the one we wanted and it was available (as you might imagine) at several stores. One of the stores is very close to our house; another is about 15 minutes away. The store farther away was selling the printer for $20 less, so I asked my son to drive over there and get it. He wanted to know why he should drive farther over 20 bucks. My response: is it going to take $20 in gas to get there and back? No. So, off he went. Grumbling a little, but such is life.

It was a small amount of money, but an important point. A point that I hope he will recall (ideally without grumbling) in years to come when he is making more important decisions with his own money.

So many of the financial problems I see in adults – adults who, mind you, are making plenty of money – are self-inflicted wounds that I have to believe they just never learned the basics. They spend more than they earn, they rack up credit card debt for things that are totally unnecessary, and they wind up strapped for cash for absolutely no good reason. Maybe their own parents had poor money management skills. Or maybe their parents never taught them the fundamentals of money because they didn’t want them to worry about it. But, here’s the truth: teaching your kids how to handle money is as important as insisting that they do their homework or learn good table manners. Getting them into good habits early will save them (and probably you) a lot of heartache down the road.

Where should you start? Well, there are tons of books and articles on the subject, but I think there are five core lessons that are truly essential. Here they are:

There’s No Money Tree

Cute as it is when your 4-year-old says that he thinks money comes from the ATM, the truth is that it comes from hard work. By the time a child is in kindergarten or first grade they probably will be curious about where you go every day; one good answer is “I go to work and my company pays me money and we use that money to pay for things like our house, our food, your clothes and your toys.”

Lesson: Stuff costs money, and money comes from work.

Money Isn’t Infinite

Have you ever told your son or daughter, “I’m not going to buy you a bike and a surfboard, which is more important to you?” Or, “We need to make a decision as a family whether we go on a beach vacation this summer or on a ski vacation this winter, so let’s talk about which one we prefer.” The vast majority of people need to live on a budget, so whether you can afford to buy a lot or a little, the concept of limits and the ability to prioritize are things kids should start learning early on.

Lesson: Budgeting is about choices, not deprivation.

Smart People Can Make Money Go Farther

You’re kids are watching and listening to you. Has your child ever heard you utter the words “let’s wait until it goes on sale”, or “we’re going to Costco because they have better prices”? Kids love a game, comparison shopping is an excellent one to play together.

Lesson: You have the power to make the same amount of money get you more of what you want.

Money Can Protect You

The same way you tell your kid they have to wear a helmet when they go bike riding just in case they fall, you can tell him or her that it’s important to save money in case something unexpected happens. Kids are observant. They know that people lose jobs, they see news coverage of natural disasters and homelessness. Tell them that you save money for a rainy day so they don’t have to worry. And then, if they get an allowance or when they receive gifts of money for holidays or birthdays, encourage them to save a big portion of it. Get them in the habit of living on less than they earn or receive.

Lesson: Money in the bank buys you peace of mind.

Money is a Responsibility

It’s never too early to teach kids about the stupidity of trying to keep up with the Joneses. Unless you have unlimited resources, playing the “I have more toys than you” game will almost inevitably lead to debt, which will be shortly followed by misery. “Because everyone has one!” should never be an acceptable answer to “Why do you want this?”

Lesson: It’s your money, you have to decide how much of it you can spend, and what you want to spend it on.

In coming months I’ll have more to say about teaching kids the basics of budgeting, pros and cons of giving kids credit cards, and how to really get them interested in saving money. But, this is a start!

Just a note that I’ll be travelling for the month of September, so if you need to reach me, send me an email and I’ll get back to you as soon as I can. You can also always call my office and they can reach me.

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