Growing up, we may have overheard mom and dad talking about bills, budgets and things like installment loans, but never really understood what any of it meant. In America, most parents either don’t feel the need to share financial discussions with their kids or purposely try to protect them from these realities altogether in fear that it may “ruin” their childhood. But the truth is, money is an important subject for parents to discuss with their kids no matter their age. It’s best to start your kids off on the right foot with the real information they need to succeed in life rather than hope they just magically figure it out later.
We all called it an “allowance” growing up, but there’s a real problem with using that term. The word allowance means that the funds are granted instead of earned, so there’s problematic disconnect between receiving money and doing work for it. If your kids have done all their chores around the house, reward them with their “earnings” for the week. This way they can better understand that money needs to be worked for. An allowance just sounds like something they’re entitled to.
Never dismiss your kid’s wants. Instead, encourage them to write up a list of all the things they want and how much each item costs. Then, provide them with the opportunity and motivation to work for the things they want. This will help give them a sense of what things really cost, what it takes to earn the money to buy them, and the true value of a dollar. This is a lesson they’ll carry with them the rest of their lives, and hopefully pass on to their children.
Inevitably, your kids will ask you about money. Are we rich? How much do you earn? Can we afford a Ferrari? They ask about everything else, so be prepared for these types of money questions from your kids. Instead of avoiding the subject, give them an honest answer. Don’t leave them in the dark when it comes to your family’s finances. Use their questions as an opportunity to share your views about money with your child. Discuss with them the importance of saving and how it’s not about how much money you make, but how you use it and what you truly value in life.
If you’re trying to teach your kids how to save money, don’t make them sock it away for too long without a reward. Kids operate on a much faster clock than we do, and a relatively short period of time to an adult can feel like an eternity to a child. While it is important to teach them the lesson of saving, it is also equally important to regularly allow them to enjoy the benefits of their hard work and commitment. When kids see that their savings habits equate to rewards in both the present and the future, they’ll be ever more motivated to keep up with it.