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Katy and I don’t have kids yet, but we hope to start a family in the near future. And it’s important to us to pass on healthy attitudes about money and possessions to our kids, and to equip them to be in control of their money and stay debt free.
A wise man once told me that you shouldn’t give parenting advice unless you have kids. However, I do know personal finance. But I want to be careful in writing this to not overstep my bounds. So, I write this post to my future self. And hopefully these will help you as you guide your own children.
9 Things I Will Teach My Kids About Money!
1. Money Doesn’t Grow On…
It’s cliché, but many kids are shocked when they graduate only to realize that money really doesn’t grow on trees. Most parents feel that kids should do certain chores simply because they are part of the family, such as doing dishes, cleaning their bedroom, etc…and I agree. But you can also assign extra projects and pay them “commission.” If they don’t do the work, they don’t get paid…just like real life. This teaches them that money has to be earned, and it gives them an income that you can now teach them to manage.
2. You Can’t Buy Happy
In our American-dream mentality, we often believe that more money and more stuff will make us more happy. But this really isn’t true. The happiest people in the world have learned to be content with what they have. Often times, having more money just makes life more complicated. Money can be used for a lot of good things, but it is not a prerequisite to a happy life. Teach your kids to value things that will allow them to be truly happy – contentment, generosity, relationships, and fulfilling their life-purpose.
3. You Have to Live on a Budget
Money is not a limitless resource. Like adults, kids have to plan how they will use their money. Otherwise they’ll just spend mindlessly and end up broke. If your child earns $30 per month, help them to plan out on paper how they will spend that money…save $5, buy dad’s birthday gift for $15, and so on…Help them develop this habit now so they can start off their life being in control of their finances.
4. Follow the 80-10-10 Rule
Along with budgeting, I want my kids to learn this simple formula…80-10-10. The first 10% of any money they receive should be given, either to our church, another ministry, or a charity they care about. The next 10% should be saved for the future. The other 80% is theirs to spend as they please, but it must be budgeted. This will help them develop these giving, saving, and spending habits for the rest of their lives.
5. Avoid The Debt-Trap
I want my kids to understand the dangers of debt. When they’re old enough, discuss credit cards, loans, and car payments with your kids. Help them understand that buying things on credit ends up costing more than if they had paid in cash. Growing up, I was taught by example that credit and debt were the way to buy things. It only follows that as an adult I racked up over $50,000 of consumer debt. I want to make sure my kids understand why and how to avoid this debt-trap.
6. Companies Want Your Money
The average American sees 1,500 ads per day. Corporations want our money and our kids’ money. Watch the commercials on your kids’ favorite shows. These companies work hard to turn our kids into consumers. That’s why it’s important to teach them not to believe everything they see on commercials and TV. As they get older, help them understand that these ads are designed to get them to spend money on stuff they don’t really need.
7. Money is Not the Goal
I remember a teacher asking what I wanted to be when I grew up. I said, “I want to be rich!” I want my kids to know that accumulating a bunch of money and stuff is not a worthwhile goal. Money is not an end itself…it is only a means to an end. What good is a million dollars if just sits at the end of a balance sheet? I want my children to know that it’s not the number that counts; it’s what you do with it.
8. Make Goals For Your Money
Money itself shouldn’t be a goal, but mindless spending is no way to handle finances. It’s imperative to teach our kids how to set reasonable and achievable goals for their money. This includes short term goals, like saving for a video game, and long term goals, like saving for their first car. Setting goals helps us to stay motivated and focused, and this is a skill kids need to start learning early.
9. Dare to Not Compare
As a child, one of my friend’s parents got a brand new car, and I was jealous. In her wisdom, my mom told me, “We could have a new car. But you don’t know what they may have had to give up in order to have that car.” There will always be people who have nicer, newer, better and more. But as I said above, having more money and more stuff doesn’t make you more happy. We need to teach our children to be thankful and content with what they have, to handle their money wisely, and to not let other people determine their happiness.
If you are a parent, you know better than anyone that children learn from our example. If you don’t have control over your finances…budget, debt, savings…your kids will likely follow suit. However, if you can get control of your money now, your kids will have a much better chance of winning with money when they are on their own.
Let us know if we can help!
Yours In Freedom,
Clint
Join the conversation…What financial wisdom are you/will you pass on to your children?
April 19th, 2011 at 06:58 pm 1303239535
As a parent of children ages 13, 12, 8, 6 and 5, I can tell you that kids learn by example. We've always been fairly conscious of economic choices, and we've discussed this with our kids. When we were planning a trip, we did away with local entertainment and dining. We explained it that by saving this money now, we'd have more later. Not all of my children are frugal - some blow through their money, but they know that they won't be getting more until allowance, or they will borrow from us and pay us back. It important not to cookie-cut your kids and expect them to be exactly like you. We've gotten around individual difference in spending by giving all of them gift cards with the same amount on it, letting them spend it as they chose.
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April 22nd, 2011 at 03:15 pm 1303485359
Hope you enjoy my posts. Thanks again for the comments.