Teaching Kids About Money – Here’s What Helps

Photo Credit: Memory_Freak

This is a guest post written by Clair Schwan.

I can’t say that I have a lot of experience with kids, but I have a lot of experience with money, and part of my childhood involved what I thought was a good training program about the value of money and how it might best be handled. I had four of the best teachers I could possibly ask for – two grandparents who were young adults in the Great Depression, and two parents who grew up in it and struggled through the challenging economic times surrounding World War II.

My grandmother spoke of the family going on “relief” so they could have money to buy food, and my grandfather had to steal corn out of farmers’ fields to have something to eat. My mother spoke of a doll that was repainted and fitted with a new dress each Christmas – that was her gift each year for many Christmases in a row. My father recalled eating canned goods with a burnt flavor as they had been purchased at a fire sale. My grandparents lived in a one room shack, and added onto it over the years until it became a regular home. My father remembers digging out the basement by hand, one wheel barrow full of dirt at a time.

If you can’t learn the value of money from a family that went through such tough times, then you’re just not paying attention. I paid attention because their life wasn’t anything that I wanted to repeat. Here are some of the basics that I learned about money and children from these four living lessons in personal finance.

Start a Savings Account – I can’t remember when I started contributing to my first savings account, but it was before the age of 10, and I can remember making small deposits of my allowance, and larger deposits from yard work and odd jobs that I performed around the neighborhood. I didn’t know what all my savings would be used for, but I was encouraged to continue saving my money for something worthwhile. I used my savings to put myself through college and make a down payment on my first home. I’m still savings oriented today.

Encourage Regular Employment – as odd as this might seem, regular employment to some isn’t a big concern when children are out of school for the summer. To the financially responsible, we know that regular employment – especially self employment – is a key to financial freedom and whatever sense of financial security we hope to establish. Having children work during the summer and after school, even on a part-time basis, builds a pattern of industry that carries over into adulthood.

Be Goal Oriented – help your children establish reasonable and achievable goals, including short term objectives and longer term goals that contribute to lasting success in life. Education is one of those goals, and it’s as good a reason as any for earning money and saving it. Most individuals who aren’t successful and find themselves in trouble with the law share a common trait – they are aimless in their approach to life. In other words, they have few if any meaningful goals. Teach the habit of being goal oriented for it serves as a motivator and helps us focus our efforts on achievement.

Provide the Basics – you can’t have your children whining about not having food, clothing, shelter and other basics, but you can have them whining about not having a cell phone, blackberry, portable DVD player or the latest fashions. Your job is to provide the basics, and their job should be to earn money so they can have the unnecessary fluff that makes their life complete. And, it will quickly begin to look like fluff to them when they have to pay for it.

Set Good Examples – no matter how much your children might be against your generation and your ways, they pick up on your habits – good and bad. As an associate of mine said, “I have become my father.” So, if you expect your children to be financially successful, you have to lead by example. If they see you carefully making financial decisions, then they’ll be likely to do the same. Many of us never sit down with our kids and give them a formal education in personal finance, but whatever we practice most certainly rubs off of them.

Use Credit Sparingly – my neighbor and good friend told me that he bought a car on credit once and nearly lost it because he was having trouble making the payments. It was such a terrible feeling that he vowed to pay cash for all regular purchases from that day forward. Well, that can work fine today if you have a big pile of it somewhere, but often, using a credit card is very convenient and safer than paying with cash. Teach your kids that credit cards are a way of making a transaction, they’re not a way to give yourself a personal loan.

Look Into the Future – from a very pragmatic standpoint, your children will most likely become one of three things, according to how you’ve trained them. They’ll be: neutral with respect to your personal finances because they’ve been taught to be self reliant; a lifelong financial burden that you just can’t get rid of; or, a resource to help you manage your affairs when you get older and need help. Imagine you’re in your “golden years” and ask yourself what kind of child you’d like to have helping you. If you’re like me, you’ll want a smart one who can handle personal financial matters.

Explain Where Things Come From – if we teach our children to equate their comfort, convenience and security to income and good financial management, they’ll likely be interested in building skills in those areas. Of course, we can’t buy love, happiness, integrity, peace and many other things with money, but much of what we need and want hinges on our ability to effectively manage our personal finances. Take opportunities to show that the house, the car, the food on the table, the cottage at the lake, the summer vacation, and other items and resources for their care, comfort and enjoyment are directly tied to personal finance skills. Don’t make them “get it” later in life as they look back on events and start piecing things together. Instead, get it out in the open so they’re introduced to what will necessarily become their responsibility one day – providing for themselves.

Don’t Shield Them from Reality – sometimes life hands us a bruise, bump or slap upside the head. If we shield our children from such things, we’re reducing the number and variety of learning experiences that will help them be better life managers. Perhaps it’s a worthless product they purchased, loose change they misplaced, or a bet they lost and had to pay. Seize the opportunity to find the lesson in it, and see if you might use the lesson to help cement beliefs about being more careful about making, spending and safeguarding money. The reality of life will hit them sooner or later. If it hits them sooner, then you’ll be there to help them through it, and use the experience to help them mature in the area of managing personal financial matters.

Raising children is your opportunity to make them the best person possible, based on your know-how. There’s every reason under the sun to include education and training in personal finances as part of the process of shaping your children for a lifetime of success.

About the Author: Clair Schwan lives a debt-free life with his sweetheart Ellen in Cheyenne, Wyoming. He hosts www.Frugal-Living-Freedom.com where he encourages individuals to make good use of hard earned money. He’s also a managing editor of the www.Self-Reliance-Works.com where he provides examples and encouragement for those interested in living a more self directed life.

About Clair Schwan

5 Responses to “Teaching Kids About Money – Here’s What Helps”

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  1. Debt Solution says:

    Great information especially the part about ‘Setting an Example’, children in general hate most of the stuff we tell them to do, but they continually watch the things we do and they learn by example.

    From my experience the kids will still go out there and get into debt because they will always experiment, they want to make their own decisions, they want to do things their way. But the lessons they learned as a child from parents that handled their finances properly will be the crutch that they will fall back on.

    Also your point about having the kids understand where the money comes from is very important too. It made me think of how my children literally thought money grew on tree’s. I probably should have explained more about how we made our money than just saying we own our own business.

  2. I know that it is hard to budget today with the economy the way it is. Your blog really helps. I also want to encourage everyone to make sure you have some kind of disability policy. This recommendation is out of concern because, if something happens to the bread winner and no disability policy has been purchased, it can be very difficult on the family to pay their monthly bills.

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