Children inherit physical traits from their parents. But there's
something else they inherit that many parents don't consider—their
Most parents believe that kids should start learning how to manage
money before they start kindergarten. But many admit they don't know
where to start or what to teach.
From the moment they're born, kids learn how to live by observing
their parents. You can start teaching your kids about money by simply
explaining to them what you're doing when you make day-to-day saving
and spending decisions. And the stuff you don't want them to pick up?
Stop doing it. And even when you blow it, don't stop. Let real life
give you the opportunity to teach your children what to do under those
Never spend it all. Show your children how to save money. Tell them
what a retirement account is and how interest works to make money
grow. Most importantly, teach them that they'll never be broke if they
always save for the future.
Delay gratification. Look for opportunities to explain the principle
of delayed gratification. Patience builds character. It's better to
save now and pay later. Teach kids the difference between needs and
wants. Children need to understand how making financial sacrifices
today can improve their financial situations in the future. It's good
for children to yearn. Having all they want whenever they want it does
not prepare them to thrive in the real world.
Spending choices. Kids assume that if you have enough money you can
have everything you want. And if you have everything you want then you
are happy. Hmmm ... wonder where they got that?
Never tell your kids, "We can't afford it." Think about it. That tells
the kids the only reason you can't buy this or that is because we are
poor and pathetic. If we had more money then we would be happy because
we could buy whatever we want. Instead, tell your kids, "We don't
choose to spend our money that way." Much better because you've
established the principle that life is about choices. And making the
right choices builds character. Now the subject isn't about money, but
rather about values.
Compare prices. The grocery store is a great place to show the kids
how you compare unit prices—the price per ounce for example. Show them
that just because something is on sale doesn't mean it's the best
value. Comparing prices is like getting a second opinion so you can
make the best decision.
How banks work. Kids think ATM machines are magic, so this is a lesson
you need to address soon. They see you stick a plastic card in the
slot and out pops money. Better still, you get to keep the magic
plastic. The underlying truth in all of banking is that you have to
deposit more than you withdraw; you can only take out what you've put
Kids also think that as long as there are checks in the checkbook,
there's money in the bank. You too, huh?
Teach the kids how a checking account works. Let them catch you in the
act of paying bills, recording the checks you write and reconciling
the monthly statement. Show the kids something really cool at Mvelopes
(www.debtproofliving.mvelopes.com). This is an online budgeting system
that turns your checking account into a visual playground where you
divvy up your money into tiny envelopes. It's fun and will visualize
for the kids (for you, too) what it means to "pre-spend" your income.
Debit and credit cards. Your kids are growing up in a plastic world.
It's important that they understand as soon as possible what that
means. First it's easy to spend up a mountain of debt or blow through
the contents of a bank account with just a little piece of plastic.
But more importantly there's a big world of consumer credit pulling on
them to use plastic to live beyond their means.
Even if you've made mistakes in this area of consumer credit, you can
make that a learning experience for your kids. You don't need to
reveal all of the details, but an occasional financial faux pas can
provide a great opportunity to humanize money management. Kids benefit
from seeing how problems are solved, too.
Talking frequently to your kids will give you the opportunity to
communicate about life's many lessons.
Teaching your kids about money will be eye-opening and fulfilling for them.
For you, too.
"Debt-Proof Living" was founded in 1992 by Mary Hunt. What began as a
newsletter to encourage and empower people to break free from the
bondage of consumer debt has grown into a huge community of ordinary
people who have achieved remarkable success in their quest to
effectively manage their money and stay out of debt. Today,
"Debt-Proof Living" is read by close to 100,000 cheapskates. Click
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