My oldest child turns 11 this week!!!! Is he really getting closer to being an adult than a kid? Not only is he starting to eat us out of house and home, but we’ve now been having more mature conversations. We’ve been talking about how Middle School will be more responsibility, how he’ll have a stricter schedule (he will have to be up at 6:30am), and how the things he wants (an Apple watch, really?!) all cost money that he doesn’t have. So, we are starting to have more serious discussions about money management, which got me thinking about how we form our children’s financial habits.
Whether your child is 6 years old or 32, the ideas are essentially the same:
- Start talking at young age. Having learned a lot from my clients over the past 13 years of practice, I believe one’s money decisions are driven by values. We should instill in our kids that saving and not spending should be a priority and we need to respect the hard work that goes into making money in the first place. Those values need to start young, before they are influenced by their peers or have real world jobs.
- Require work for money given – Chores = job-like experience. Money is earned, not given, and doing so will help them develop work ethic. Kids need to be able to connect the dots that nothing comes free and hard work can be rewarding, fiscally and emotionally. We’ve also made it clear that there are chores and then there are expectations. Doing his laundry is not a chore, that’s an expectation. No one will pay him to do his laundry later in life (my best guess).
- Teach them the basics. Like spend less than you make a save the difference. I’ve fallen into the trap of letting Cayden manage his birthday money in the past. He makes grand plans to buy something great that would have required a couple jobs around the house to only two days later spend a chunk of his money on a nerf gun he doesn’t need and won’t use in 3 weeks. The values of budgeting, saving and prioritizing are HUGE for children and habits that hopefully will help them when it’s time to make huge decisions like buying a home or saving for retirement.
- Encourage the value of volunteering – I have 2 personal goals here; help my children learn the importance of helping others by having a sense of community, but also to learn to have gratitude for what they have in life. They will become adults who want to “Keep Up with the Jones” unless they learn to appreciate how blessed they are to have a roof, warm meals, and good health. This is hard when they see their friends with $1,000 phones at 8-years of age.
- Take children to investment meetings. There are two ways to make money in this world; you go and earn it, or you make your money work for you. When they get old enough, teach them the value of making their money work for them through a fundamental investment process. Share personal finance lessons with them and talk about goal setting. Involve an advisor (children are welcome to join a meeting at our office) or encourage a course on financial planning. These are essential habits, and not the type of things your kids should learn the hard way.
The reality is that schools don’t teach financial literacy anymore which adds one more thing to your parenting plate. Our best advice is to start talking about money early, lead by example and model good financial behavior, and delegate this to someone like us if you must. Because these lessons are important.
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