The way we think about money as adults can stem from the way we’re raised and how our parents handled money. In the same way, we can help our own children develop good money habits.
Money can have a profound influence on our personal and professional lives. In fact, many experts believe that children who are not taught how to handle money as children may struggle with debt and prioritizing their expenses.
On a positive note, teaching children financial responsibility allows them to be better stewards of not just their money, but also their time, skills and energy.
Good financial habits don’t just happen; rather, they are developed carefully over time. That’s why it’s important to be able to lead by example. In a world where rewards are sometimes instantaneous (and given widespread recognition, as with lottery winners) it can take some restraint on your part to show your children what it means to work for a goal and how much to save to reach that goal.
One of the primary ways children learn is indirectly—such as by observing how the family talks, thinks and acts about money. For that reason, it can be a good idea to include everyone in the family in discussions about money management. Parents should also feel free to express their desire for things they can’t afford, because children then learn, by example, about making wise decisions and saying “no” to items that aren’t in the budget.
Younger children can learn about earning and spending money with simple lessons. One way to do that is by assigning children unpaid chores while also giving them the opportunity to earn money for chores beyond the scope of their normal duties.
When handled properly, a weekly allowance provides a good lesson in money management.
With that weekly allowance, children can start keeping a record of their earnings. As they get older and start working outside the home, they will add another dimension to their financial planning - learning to keep track of expenses, such as what it costs them in gas to get to work or how much they spend on lunches.
Planning for the future
Of course, an important part of learning about earning money is learning how to save it. Parents can teach their children the difference between short-term savings for a specific want or need and regular long-term saving for unknown items and emergencies or even retirement. Teaching them such lessons early on - and getting them in the habit of putting money aside - helps them develop a pattern that will make a difference in their actions as adults.
One way to encourage saving is to create a matching program that annually matches the amount of money they save. This adds to their motivation to save and rewards them for putting aside that money for something like college, which might seem much less important now than the latest video game.
Teaching children about money does more than provide them with a better understanding of economics - it helps them understand both positive and negative outcomes of spending. When done with purpose and intention, you can teach children to have a healthy outlook toward money and a better grasp of how to make financial decisions.