What can you be doing to teach your kids about money? There’s been a lot of coverage of this question in the press recently, and surprisingly, I agree with most of it! Here’s a couple of recent news articles, with some of my commentary thrown in:
From CBS MarketWatch: “What Should You Teach Your Kids About Money?”
“If we want to teach children virtues like “modesty, thrift and patience,” Lieber says, we can use money early on to help instill those lessons — for example, by giving a child a $3 weekly allowance with the instruction that he or she must save at least $1 for a future purchase, and give at least $1 to a good cause. Making children save teaches them early on about the trade-offs between spending now and spending later. And making them give $1 teaches them the true value of a dollar, the needs of others, and how to research worthwhile causes.”
Lieber reiterates a very important idea: start early, and start small. Giving kids a financial education doesn’t have to be hard or expensive. Just the act of giving a child a few dollars a week to manage, and then talking about it together, is an easy way to give financial education over and above anything that kids will ever learn in school. Taking that weekly or monthly allowance and expanding it size and scope, as we detail in our book, has leads our kids to have financial savvy at age 14 that I didn’t develop until my 20s.
- Make the feel the money they spend is theirs
- Tell family stories that illustrate money values
- Lead by example
- Manage expectations
Dan’s hitting on all cylinders here! It’s so important that the kids are fully invested their allowance – that they value the money they’re receiving and understand the importance to manage it wisely. His second point is one that many find hard – talking about money. We’re very reluctant as Americans to talk about money, but it is SO IMPORTANT for kids to have these conversations if they’re going to develop financial wisdom. They can (and should) learn from the mistakes that you’ve made when you were younger, or from the successes you’ve had in the past.
Finally, manage expectations. Let your kids know that you don’t expect them to be perfect, just as you know you’re not perfect. Conversation is key – learn from each other’s experiences! As you teach your kids about money, believe it or not – you’ll learn quite a bit in the process as well.