I remember the first time I held both Lauren and Taylor in my arms. It’s an overwhelming moment, and you are so full of love. And in the next breath, panic sets in. You are responsible for this precious life. It is up to you to raise your kids right, so when they go off into this great, big world, they are prepared to succeed. So you teach them good manners, right from wrong, feed and clothe them, give them a good education and plenty of love and support. Whew. You did everything right. Or did you?
There are countless lessons and pearls of wisdom we try to impart on our kids before they leave the nest, but too often we overlook teaching them how to handle money and make smart decisions with it. They learn by trial and error as young adults and by the time they realize their mistakes, they may have to spend years undoing them. It is always harder to change habits and beliefs when they are ingrained in us, which is why I encourage you to make money a key component in raising your kids right. Don’t wait until they head off to college. Start talking now!
It doesn’t matter how successful your child is in their profession or career, if they lack money smarts, they may still struggle financially. Financial literacy is never done, but these five lessons will help put your kids on the path to long-term financial well-being.
While there are unfortunately children who do lack proper food and shelter, most kids do not, yet they feel deprived when they are told “no”. It’s human nature to dislike being told we can’t do something or have something. While I am in no way suggesting you give your kids everything they want (that just creates a new set of problems), you do want to make sure kids understand the “why” behind the “no”. We cannot always get what we want at this very moment and kids need to understand that is a normal reality. They are not being punished or deprived. And it also doesn’t mean we can’t EVER have it, but we may need to save for it first.
The best way to avoid lingering feelings of deprivation is to give family money and their money purpose. Too often when I meet with people they are so focused on wealth accumulation and haven’t thought about what they actually want to do with their money. They have it backwards. You need to think about what you want to do first, then you know how much money you need. It always easier to save money when you know what you are saving for.
Once your kids understand that you can’t buy them a new toy because the family is saving money to go a vacation, it feels different. It wasn’t arbitrary or because you lack money. And if you can reinvigorate their excitement for the family vacation, they won’t feel deprived but excited to go on vacation. It is often memories of feeling deprived (even though in most situations they weren’t) that leads adults to spend, spend, spend.
It wasn’t that long ago, when credit cards weren’t common. We paid by cash or check for everything. If we didn’t have the money, we simply did without. These days, we slide plastic cards for almost everything. We overhear kids tell their parents to just get more money from that machine when they tell their kids they have no money. We chuckle at their innocence. Fast forward 10 years, we stop laughing when they call us crying because they have maxed out their credit cards.
Credit cards are not bad, but they are a tool that is frequently abused, starting in college for most people. The age of your child will determine how detailed you are in your explanation but make absolutely sure they understand when you slide that card, you are paying for those purchases; they are not free! As they grow older, you can explain interest to them. You don’t want to make them fear credit cards, but instead have a healthy amount of respect for them and a thorough understanding of how they work by the time they get one of their own.
You say the words “budget” and “save” to most adults and they grimace and groan. They are not beloved words in an instant gratification world. Somewhere we taught they were “bad” or “hard” so we avoid them as much possible. Let’s prevent that mindset from even developing.
I believe budgets represent freedom. I know exactly where my money goes, and I am firmly in control of how I spend it. This is how I taught my girls to view budgets and they know from firsthand experience that following a budget doesn’t prohibit them from living a good life. It actually helps make life even better because they prioritize the things they truly want. They know to save for the things that make their hearts happy. Nothing makes this Mom happier when she watches her daughters discuss a new toy they found and decide that they “like” it but don’t “love” it, so they are going to save their hard-earned money for something they love instead.
Everyone’s definition is probably a bit different and that’s okay. But if you ask most kids about wealth, they start throwing out numbers. I remember talking to a group of kids and one girl was adamant she needed 1 million dollars. When I asked what she wanted to do with her money, she answered, “look at it”.
Sure, she is a child now but that mindset won’t change unless someone helps her look at money or wealth a bit differently. We might all love to have a vault of money that we can swim laps through, a la Scrooge McDuck style, but true wealth is more than just having lots and lots of money. In fact, you don’t even need lots and lots of money to be wealthy. The trick is to figure out what makes your heart happy, not what will impress others, and that’s what you work towards. To make sure you’re using your money in alignment with your values and goals. True wealth isn’t so much the amount of money in your bank account but how you use it.
This is just a sampling of some of the important money lessons kids need to learn. For more detailed lessons, please take a look at my Money Club Workbooks. Money is a frequent topic in our home but I try to keep the casuals light so they don’t come across as lectures. I don’t think anything makes a child go hard-of-hearing faster than a lecture. Look for teachable moments throughout the day where you can talk money and engage in actual conversation.
What was the biggest money lesson from your childhood?
Shannon
Image courtesy of www.freedigitalphotos.net.
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SHANNON RYAN, CFP®
This is one thing I REALLY want to teach my kids. They are too young to understand how much of the world lives. I want them to understand how lucky we are and how grateful we should be.
The first point on your list especially resonates with me, and the discussions that I am always having with my own kids. Whenever they start complaining that they are deprived, I try to explain to them that even the Kings didn't have hot water 100 years ago. They literally have the easiest lives in the history of the world :) All they have to do is appreciate it and enjoy it..
Unfortunately I picked up bad spending habits from my parents and now my two favorite words are budget and save.
More importantly I'm telling my kids the lessons I've learned and showing the how NOT to do what I did.
Happy Monday Shannon! Hope all is well hon!
This will put him back $500. He says he won't have much after that and I simply remind him of the times I encouraged to save sooner rather than later.
I really hopes he learned his lesson.
It's been a crazy week but TGIF and the weekend is here! Have a great one Shannon and thanks for sharing!
I agree 100% about having a rich life has little to do with the amount of money you have. It's building the kind of life that is in line with your values. Then you'll be happy!
Even at a young age, I knew that an instant, and risk free, doubling of my money was something I could not pass up.