By Diana Wiley
As parents, we have big responsibilities to take care of our kids until they become adults and can support themselves. We owe it to our kids to lead them by example. Your morals and values will most likely become their morals and values as they grow into adults. Similarly, how you manage your finances may impact how they will manage theirs.
Unfortunately, many individuals cannot manage their finances as a result of not being taught how to manage money while growing up. They see their parents struggling to make ends meet yet still buying things like flat screen TVs, the latest phones, vacations, and extravagant Christmas presents by using credit cards. Savings, what savings?
Financial literacy is not taught in schools. We have to take it upon ourselves as parents to see that our children develop financial wisdom. As a start, here are some tips for teaching our children about money management and savings.
- Become a good teacher: Educate yourself and lead by example. Learn about budgeting, expense cutting, saving, investing, and eliminating debt. Start now—it is never too late!
- Share the family’s budget: If your kids understand how much living expenses cost and how those expenses fit in the budget, they will learn that “money doesn’t grow on trees.”
- Have your kids earn their allowance: Make it fun! Pay them for chores around the house, whether it’s keeping their room clean, washing dishes, or taking the trash out, and keep track of the chores on the refrigerator door. You’ll be surprised to see how productive kids become.
- Teach them to save money for something they want: Have your children save their allowance or earnings to buy the latest trendy electronic, toy, or article of clothing rather than buying it for them yourself. Discuss how much the item costs and help them set a realistic savings goal. Take them shopping to buy what they have been saving for and have them pay for it. Your children will feel an enormous sense of pride and ownership having bought their special item with their own money!
- Open a bank account in your child’s name: As they get into high school, open a joint checking and savings account. Have them start managing their own expenses, such as getting gas, eating out, and shopping. This will help them form a realistic picture of expenses, which will help them as they prepare to leave home and go to college.
- Create a budget just for your kids: This is an important step especially for kids getting ready to go off to college or move out on their own for the first time. Help them create a budget that takes into account the bills for books, rent, food, etc. Teach them to prioritize—what do they really need to spend money on first? Deposit the money in their account (if they aren’t earning it on their own yet), but have them pay their bills themselves out of that money. Let them know that they won’t be getting any extra money and encourage them to stick to their budget. Believe me, they will soon learn the financial difference between eating out and buying groceries, or impulse buying and buying something they really need!
- Help them with long term investing: Teach them the power of compound interest. Help them set goals for their future. If they see you saving for retirement and understand that you have a plan, they will see the importance of starting out early.
You might find as you look back on your life that you did not have your parents teach you about money. What kind of financial hardships did you experience as a result? Making a difference in your children’s lives starts with you—and it starts today. Ask yourself: Do I want my kids to have my life? Do I want my kids to have a financial education? Teach them by example so they can do as you do and not simply as you say.