RSS FeedKids and Money
People often fall into two categories when it comes to managing finances: those whose parents taught them the value of a dollar and those whose parents didn’t. People falling into the former category are pretty lucky, and those that fall into the latter probably ran into some obstacles when they got out on their own to make their way in the world. The ability to effectively manage finances isn’t genetic – it’s something we need to be taught to do, and regardless of which category you personally fall into, if you have children or plan to have children, you can recognize the need to start teaching your kids early on the importance of not spending money like it grows on trees.
The sooner you begin teaching your kids about money, the better off they will be. Though very small children might not grasp the subtleties of financial planning, they can understand it in a broader sense. Starting off broad and narrowing the focus as they get older is the best approach. You can teach a very small child that money isn’t infinite – even though it seems like Mom or Dad just walk up to the ATM machine and magically get money after pushing a few buttons, you must endeavor to make them understand that the money is there because you worked for it. It’s not magic and it is the product of earning it.
To help them learn this lesson, you can give them an allowance that is based on their age and abilities. In order to get the allowance, they must do something for it – make the bed, pick up the toys, whatever chore you find is appropriate – and if they don’t do the work, they don’t get the allowance. If you institute a rule that allowance money must be used in order to get things your child wants, your child will eventually learn to save. After the first few times your child must go without something they really want because they’ve already impulsively spent their allowance on small nonsense things, the lesson will hit home – money isn’t infinite, it has a value attached to it, and if you really want something, you can’t spend what you have on things that are unrelated to that goal.
By sticking to your guns and teaching your kids, you can potentially head off major financial disasters in their lives in future. This isn’t to say that they won’t make mistakes, because they will. Mistakes are part of the learning process, after all. But instituting solid financial awareness from a young age will create people that grow up to be able to learn from their mistakes and eventually be capable money-managers.