I believe teaching kids about money is one of the most loving things you can do as a parent.
Americans, especially younger generations, is struggling with financial literacy. The popular Jump$tart personal finance testshowed that 63 percent of nearly 6,000 high school students failed their test on financial literacy basics. Living in a society that struggles with credit card debt, student loan debt and an overall lack of fiscal discipline should motivate us as parents to involve our children in money decisions around the home. Simple ways to teach your children about money can be found in everyday activities.
Don’t Stop at No
How many times have you been at the store and turned down your children when they ask to buy something? If you’re like me, it happens quite often. And it offers a teachable moment.
“Children need to understand Mom and Dad have a valid and thoughtful reason behind the ‘no’ to help avoid feelings of deprivation” said Shannon Ryan, a certified financial planner, author of numerous books on teaching children about money and founder of The Heavy Purse. “When those feelings of deprivation are not addressed, it can cause children to feel resentful and tell themselves that they will buy whatever they want, whenever they want when they grow up.”
This is a great opportunity to point your children to your family goals. Those goals generally take money, and by helping your children see the bigger picture, it can mitigate that feeling of deprivation and excite your children about working as a family to reach these goals.
Save, Spend, Share
Many parents give their children an allowance. I received one as a child and loved it. While it may be fine to reward your children for things they do, an allowance can easily make children feel that they’re entitled to receive money for nothing. Last I checked, no one gives us money for nothing.
Ryan and her husband defined sets of chores their children need to complete, without pay, as members of the home. To earn money, they can choose other tasks from a weekly job list. That money — along with any other money they earn or receive — is allocated according to a save, spend, share plan they’ve decided on together.
This approach allows children to have a purpose or a goal for their money. They can begin to learn the importance of separating emotions from making financial decisions. This allows children to decide if they truly want a given item and to see the true cost of purchasing an item, saving for a future desire/need or helping someone else. They will also learn how to make money work for them.