Teaching your kids about money and money management, are important life skills and they’re also important because you want your children to avoid the many financial hardships and pitfalls that many kids or adults of today are facing. While my children may still be too young to be teaching them any complex money concepts, there are some basic fundamental financial lessons that I believe can be applied to all age groups, and I hope to pass these on to my own kids.
The difference between wants and needs
How many times have you went in a store and had your kids have a meltdown that they really want something? Fortunately for me, that hasn’t happened yet. My 2-year old daughter is more than happy to play with all the toys in the store in their boxes and then puts them back after she’s done with them. Ha! I wish I had that same sort of self-discipline when I was a kid. And we taught her taught her that! (Yay for us).
But she’s learning that she doesn’t actually ‘need’ those items – and in fact, she may not really even want them. It’s not about restricting her from buying anything. If there’s something that she really likes, I’ll make a mental note of it and the next time we go back to the toy store, if she’s completely thrilled about the same item than I may buy it. But some kids have more toys than they can ever want, never mind need. In fact none of those are needs at all.
It’s amazing how many adults still can’t tell the difference. So I think it’s important that our children don’t grow up with a sense of entitlement and are able to make important financial choices for themselves, and later their families, by balancing what they want, with what they really need.
I overheard one of the neighbours the other day, as she was packing her child into the car, telling her child, “Mommy and daddy have to go to work now, so we have enough money to buy you all that nice stuff!” Please don’t tell your children that! People work, so they can earn money to buy all the things that you need and THEN some of the things you want.
Money is earned
“Money doesn’t grow on trees”, my dad used to say (and just about every dad in his day). That phrase probably doesn’t mean too much to the average 2-year old, but I think they can be taught from an early age, that yes, you need money to buy things, but also that that money is earned by working.
The university program I took up, was one of the more expensive ones offered at my university at the time. And while I worked my butt off in school and late nights at part-time jobs, I was surprised at the amount of students, that proudly claimed they were not working, because they were “full-time students”. They also weren’t paying for it and so it comes as no surprise that the vast majority of them never even worked in the field, upon graduation. Education is expensive, and as a parent I will do what I can to help my own, but I also don’t believe in giving them a free ride. Encourage your kids to get a job. Not only is a job good at keeping your bank account in the black, but I believe every job teaches you important and valuable life skills.
You may have to wait to buy something you want
In today’s cashless society it’s getting harder and harder for kids to get a real sense for the value of the money. They see you and just about everyone else in line at the checkout counter, just swiping the cards, and not getting a real sense for the value of money. So it’s important for children to know that they can’t have everything they want and that everything they want right now, might not be what they want tomorrow.
Whether through an allowance or birthday money, have them use their own money and allow them to make decisions on what they want to spend their money on. Even as adults, when it’s not your money, your options of what you could buy are endless. But when it’s your own money, and you’re paying with cash, you’re much more likely to become much more selective of what you’re spending it on. Self-discipline is one of the toughest to battle as an adult, and the earlier our kids can learn it, the further ahead they’ll be.
Take the opportunity to teach your kids about how much things really cost by allowing them to create their own budget for their birthday party, or the family camping trip, for example.
You need to make choices with your money
Every time we open our wallets and take out cash or credit, we’re making a choice with our money. Once we’ve dealt with how much we need to pay the bills, we decide how much we spend, how much we save, and how much we choose to share with others.
And it helps to map out your money, by setting money goals that you want to achieve (whether it’s to put aside money for college education or send your dad on a luxurious vacation when he turns 50, I’m all for it!). But plan, plan, plan. This is not one thing you want to set and forget. Give every dollar a purpose and make choices with your money.
Many sites recommend starting off with save, spend and share jars and I think those are a really great idea for kids. It teaches them how to allocate their money and work towards a goal. And it doesn’t have to be split equally. Have them choose. You’re there to guide them, but ultimately they need to learn to make choices with their own money.
The sooner you start saving, the better
Young children pick up on your actions and attitudes toward money, whether they can articulate that or not. So, it’s important to not only encourage the benefits of saving, but to lead by example. We’ve all heard that time is money, and that even small savings can add up to a lot over time. Especially, when they’re young. But the real benefit of teaching children early, is in knowing that the earlier they start, the better off they’ll be in securing a great financial future.
After all, isn’t that what we all want for our kids?