How To Teach Your Kids To Manage Money
By Mir Kamin of Woulda Coulda Shoulda
1. Don’t buy them everything they want.
Talk early and often about the difference between “wants” and “needs,” and make it clear that you’ll meet their needs, but that nobody gets everything they want. (Adding a story about your miserable childhood, walking uphill four miles to school in a blizzard with no shoes, is optional.)
2. Give them a modest allowance.
A child who is old enough to count is old enough to get allowance. The amount is up to you, obviously, but it should be an age-appropriate amount where stuff they’ll want will require at least a few weeks of saving to buy. Don’t tie this money to chores, either — normal chores are part of being in a family, not about getting paid.
3. Set parameters and then let them make mistakes.
You can stipulate up front that certain amounts must go into savings and/or be donated, but after that, it’s up to them. If they blow it all on trading cards or chewing gum, oh well. Then when they come begging for a loan for that one thing they simply must have you can nod sympathetically and help them figure out how many weeks until they’ll save enough to buy it. The Bank of Mom doesn’t offer loans.
4. Create opportunities for extra earnings.
Your kids have “regular” chores, already. By all means feel free to offer up those bigger, unpleasant tasks as optional paid jobs — weeding, shoveling snow, whatever they’ll really have to work at to earn those extra bucks — and kick back while they learn the value of a dollar. Everyone wins!
5. Set a good example.
This one should be a no-brainer, but it’s the one people miss the most. You not only have to manage your money responsibly, you have to let them see you do it. That doesn’t mean sitting down together with your checkbook, but it does mean taking them shopping with you and being open about how you decide what to buy. Your explanations can grow as your child does, and with any luck, by high school your kid knows both the rewards of delayed gratification and never to use a credit card unless they have money in the bank to cover it.
