I wish I would have learned more about money management as a child. I have had to rely on my spouse, my own self control, and a personal finance class in college to manage money better as an adult. I would like to help my children have a sense of responsible money management from early on in their lives. As my husband and I work through teaching them about saving, sharing, and spending, I have put together my top five helpful hints to teach money management to children.
Model: As with any area of parenting, modeling is one of the strongest ways to communicate anything to your child. When your child sees you choose when to spend money or save money, they see that they too will someday do as you do. Children innately want to be similar to that parents. You have set the norm of humanity for them and they will follow in your footsteps.
Be open: Knowing that your modeling is important, it helps to be transparent about your thinking. They can not infer what is going on in our heads as we make financial decisions so it can be helpful to explain when possible. I try to explain to my children why I am choosing between two products in the grocery store or why we are choosing to (or not to) go out for dinner. When they hear our thinking on the matter, they start to log these ideas and they can become part of their internal dialog when making financial decisions in the future.
Be clear about your values: Without sounding too preachy, it is important to share your family values about money. I realized this one day when we were at the grocery store and at the register, the cashier asked if we would donate $2 to the “cause of the month”. I responded “Not today.” As we walked to the car with our groceries, my son asked, “Mom, why didn’t you want to give money?” This was a perfect opportunity for me to explain that our family does give to certain organizations and that his dad and I make those decisions together every year. When we have time to research an organization and how they are helping and how they spend the donations, then we can decide how much we want to give. Then I was able to share some of the organizations we have given to. Before that, I don't know that he had known very much about how we donate money. There are so many things we do in our adult lives that are about just checking boxes throughout the day: we forget that we must prepare our children so that they too, can one day make those choices.
Allow them to stumble: This is such a hard one as a parent. I hate watching my children stumble, but I know it is important to their growing up. It is better that they stumble now with little problems (and our support) and then learn to rely on themselves to push through and persevere. After they leave the security of the nest, we really want them to have a robust and diverse toolkit for managing challenge and making decisions. Allow them to spend their money, even if they spend it on something you think is ridiculous. I have watched my children purchase toys based on the amazing graphics on the box, only later to be completely disappointed by the sad toy inside. Of course, I knew it was too good to be true; this toy was going to be nowhere as cool as the commercial, but they wanted to spend their money. This was their plan. And when they discovered the truth as they watched the toy fail, it made them more careful the next time they were ready to spend money. It made them ask different questions and in some cases, they have resisted a tempting purchase, discerning that the toy was not worth the money.
Create opportunity: Create meaningful opportunities for them to save, share, and spend money. It is important that they learn to do all three. When they get money as a gift or for allowance, have them divide as they see fit into these three categories. There are simple kids’ banks that have a compartment for each. Or you can DIY it and just have a jar labeled for each. Let them decide how much goes in each jar, but make sure that some amount must go into each jar. That way, when they are ready to spend, they can see how much they have. The savings jar can have a label with an item for which they would like to save. This gives them a goal and direction when they go to divide the money. Share is a place they can go to when the family is ready to discuss how they will share some of their money each year. Your child may have some input on where that money should go, and pulling from their own resources helps them have a meaningful connection to the cause.
I do not want to pass on my own early struggles with money to my children. I want them to develop the tools to create their own way of relating to the world. I want them to be successful and joyful in all aspects of life and I do not want them to be held back by my fears, missteps, or weaknesses. I want then to know how to work through difficult decisions and be at peace with the decisions they make.