Want to raise financially responsible kids? Our first financial lessons often come from our parents.
Whether we realize it or not, kids notice how their parents spend and/or save money. So if you’re someone who is frugal, your child will likely consider that to be normal and have an early mentality set for financial frugality.
However, just because you are a financially responsible parent does not mean your kids will automatically be financially responsible too. Case in point: My husband went to a high school where many of his classmates came from wealthy families. Although there were a few exceptions, the majority of his high school friends are still living off of their parents’ money. At almost 30 years old, they don’t have jobs (although they prefer to call themselves “entrepreneurs”), and they continue to spend as if they are “making bank”. Imagine flying first class to Europe on a whim or dropping $2,000 for bottle service at a swanky Vegas club. Yah – I can’t either.
In fact, I’ve been working since I was 16, and my parents always stressed the importance of keeping a strong work ethic. That’s why it’s hard for me to wrap my head around it. One of my personal proudest moments was when I realized I was financially independent, so I wonder…don’t my peers want to achieve the same thing? I guess I thought that with such successful, financially-savvy parents, some of it would have rubbed off on the kids too. While I’m sure the parents have good intentions, I think they are doing their children a disservice by letting them continue to mooch off of them.
Kids with financially responsible parents may have an edge in terms of opportunity (i.e. access to learning about smart money management), but it’s really up to the parents to make sure their kids put it into practice.
Want your child to understand the value of money and make smart financial decisions? Here are my top 3 tips for raising financially responsible kids!
- Shut down any feelings of entitlement, and make your child work.
Your kids need to know right from the get-go that your money does not equal their money. Once you’ve provided for their basic needs, have them earn everything else. Whether it’s doing extra chores or taking on a part-time job, it will teach your child first-hand how time and effort relates to money. Keep in mind that your job as a parent is to help transform your dependent child into a responsible, self-supporting adult. You’ll do the exact opposite if you give into their every whim. - Allow your child to manage real money.
Whether your child receives an allowance or they earn money through work, it’s important that they learn to be responsible for managing their own money. Encourage your child to save a sizable portion of their “income” before making sensible decisions on how to spend the rest. After a while, kids will learn how to sort their priorities and stretch their dollars. By letting your child manage their own money, they will also have a chance to learn about the consequences of their choices and in some instances, what it means to do without. - Teach your child the art of patience.
Kids want to buy things on impulse. However, if they waited a week or two, whatever object they desired would probably be replaced by something else. How about having your child create a “want list”? Your child can put their top 5 “want” items on a piece of paper and update it weekly. If after 1 month, the same item remains in the top spot, your child may purchase it with their own money. It teaches the all important lesson of wanting something but learning to wait for it. As this process repeats itself, your child will develop patience to make better financial decisions. In addition, having kids spend their own cash will remind them that money is finite. If you don’t have the money, you simply can’t spend it.
If you are like many parents, you want your child to have everything good in life. As much as you want to cater to your child’s wishes, there will be more gratification in the long run (for both you and your child) if you teach them to wait, save money, and spend wisely.