As a dad of three children, I'd never want to be accused of bad parenting. On the other hand, I try not to judge other moms and dads, either. Everyone has their own parenting style. Raising a child takes patience and learning to say “no.”
Let's face it will live in a very different world then when our parents raised us, and when our grandparents raised them. Our parenting skills have had to evolve with the changes in the world we live in.
Kids learn in a lot of different ways. Some are visual learners, some are verbal, and others are social learners. For many years my wife and I were not good role models for our children when it came to how we handled our money.
Lead by example was something my mom and dad taught me, but it was not something my wife and I were doing well when it came to finances. We didn't even realize it. We were living, like everyone else we thought, using credit cards to inflate our lifestyle and live beyond our means for over ten years.
We accumulated over $100k in consumer debt before we reversed course, built a budget, and a plan for getting out of debt. Part of that realization was the bad parenting behavior we were displaying to our three kids with our poor money management.
It shouldn't have been a light bulb moment to realize we needed to teach our kids about money, but it was. Handling money is one of the life long skills all of us needed. My wife and I agreed we needed to be better role models, and got to work improving our knowledge on the topic and teaching our children more about money. Here are some of the steps we have taken.
Talk About Money
One of the simplest things you can to help teach your children about money is to make it a topic of conversation in your house. During family meals is an excellent opportunity; you have a captive audience for at least 15-20 minutes.
It was one of the first approaches my wife and I took to broach the money topic with our kids. Surprisingly the kids were interested. Our kids loved to be empowered by learning about adulthood. We asked them things like:
- Do they know how much money we make
- How often we get paid
- The cost of owning the house
- How much money we spent on food
It made for excellent mealtime conversation and laughs. There were several outlandish answers given by our kids. The thought we made a million dollars and that our house mortgage cost $500.
We also found that just talking about money with our kids could be boring to them. The could really care less about the mortgage because it is not something the directly care about. But when we explained to them, we had to cut back, and say no to things more often they got interested.
Saying no might have a directed impact on them, and the things they wanted to do. We gave them our reason why we planned to say no more often. That our goal was to get out of debt and be able to do anything we wanted after we had accomplished our debt repayment goal.
My wife and I also found that talking to the kids about things they were interested in held their attention longer. We spoke of things in like cell phones, ice cream, and video games, and we incorporated a money component into the discussion, as opposed to just talking money.
Take it from my experience these conversations might test your patience, but lay the groundwork for good money foundation, and kids who are not afraid to talk money.
When we explained to our kids that a trip to the ice cream truck could cost our family between $10-15 and that we'd instead buying ice cream at the grocery store, they frowned. When I explained that for the same $10-15, we could get a whole lot more ice cream and they could eat it all week, they liked that idea. Little did they know they were learning about money in the process. Little did I understand giving the kids ice cream seven days a week was not effective parenting or something my wife would agree too.
Chores and Allowance
Chores and allowance are another way to layering in learning about money in topics kids are interested in. Granted, most of not interested in chores, but most are interested in earning money.
Now there are many different parenting styles when it comes to chores and allowance. I'm not going to tell you how to raise a child, but instead, give you a few suggestions on what we did.
My wife and I first agreed that we begin to give our kids allowance at some point. For the kids to earn it, they have to follow our family rules, keep their room clean, do their school work, etc. If they did these things, they would earn a flat rate each week, say five dollars.
We also gave them the opportunity to earn more commission if they when above and beyond with helping around the house. We posted a list like this on the refrigerator:
- Load, run, and empty dishwasher.
- Do a load of laundry, wash, dry, fold, put away.
- Take out gragabe.
- Take garbage cans to the curb, and bring cans in.
- Dust the house.
- Vacuum the house.
- Mow lawn.
Now each category could earn the kids a bit of extra commission, anywhere between $0.50 and $10.00 depending on the extra work completed. This was a way to help get things done around the house for mom and dad, teach the kids about work and income, and made even create a little sibling rivalry.
How you handle cores, and allowance is totally up to you, but this is was we found worked best for our three kids. Now here are even more suggestions to teach kids money based on the age of your kids.
Preschoolers 3-4 years old
It's never too early to begin teaching your kids life long skills. Here are a few ideas to begin preparing your preschoolers about money.
- Counting Money – This is straight forward, begin teaching your child how to count. Once they understand basic numbers, introduce coin and bills. You can also start explaining and showing them how much things cost. Starting with their favorite foods or toys is an excellent way to keep their interest.
- Delaying Gratification – This will build the muscle for years to come. We live in a want it now, have to have it now type world. Ever impulse buy something, and then regret it later? Teach your kids how to delay gratification. It's about self-control snd self-discipline. It's more about behavior than the actual money. Ever hear of The Stanford marshmallow experiment? In this study, a child was offered a choice between one small but immediate reward, or two small rewards if they waited for a period of time. Its something you could try with your child.
School Age 5-12 years old
As the kids get older, there is plenty more to learn.
- Peer Pressure – As soon as they step foot in a classroom, they will experience peer pressure. Everything from the food they eat, the clothes they wear, the toys they have, etc. Being aware of peer pressure and the influence others have on you is the first step to not giving it to it. Adults call it “Keeping up with the Jones” We need to make sure our children are aware they can make their own choices, and don't need to follow in other people's footsteps, even their parents.
- Wants vs. Needs – Understanding the difference is significant. We need a roof over our heads, food, heat, etc. I want a new smartphone, sneakers or flat-screen television. Giving them this basic overview is a great start. Having the ability to act upon it even better. We can afford anything we want, just not everything.
- Allowance – How or if you give you kids allowance is total up to you. It does provide them with the foundation for trading their time for money.
- Saying No – They need to understand that “no” is an acceptable answer. If you have multiple things to spend money on, but only the means to pay for a few, priority, choices, and saying no are all options to accomplish. It also gives them the ability to think of ways to overcome the no.
- Talking about your household budget – Teach the kids what it really costs for things, like a house, smartphones, water, heat, wifi, etc. So when you're yelling at them to turn off the lights or close the door, there's a meaning behind it. Let them know how much your income is. Help them understand how income and expenses balance.
- Take them to a bank or show them your banking app – They will have a savings account or checking account of their own someday. Take them on a tour of your bank or show them the tools you use to manage your money.
- Understanding the difference between debit cards and credit cards – When we use a debit or credit card, kids generally see the swiping but don't know where or how things get paid for. Connect the dots. Explain that debit is tied to checking and can only be used if their money in the account. A credit card has a credit limit, and if the balance is not paid in full each month, purchases cost more.
- Investing – Teach them the basics. The power of compound interest, the rule of 72, and the advantage of starting as soon as possible.
Teenagers 13-18 years old
Once in their teenage years, you can build upon the things they have already learned, and begin looking towards their futures.
- Working for Money – Share the concept that anytime you work, you are trading your time for money. Using a purchase like a night out at the movies that could cost $25, and if they work a job that pays $10 an hour, they would have to trade 2.5 hours of their free time to enjoy that night out.
- Money is a Tool – Money is just that, a tool that we use to trade for other things. So the better plan we have to use the tool, the better off we'll be. We all want to make more money, but effectively managing the money, you have it the best first step. We need to realize that money is not actually a goal but a tool to help us achieve our real goals.
- Checking and Savings Accounts – Help them set up their accounts, how to automate savings, interest rates on saving account, other options (high yield savings accounts) a deep dive on all things about banking accounts. The good news here with all the tools banks offer online, your child may never step foot in a bank.
- Finding balance making money vs. extra activities – Most teenagers land their first part-time jobs. But often they give up sports, clubs, homework, social time with friends, etc. to make money. They must understand what they are giving up, their goals, and the fact that they will work for several years in the future.
- Rainy Day Fund – Teach them that life has a way of punching you in the face sometimes. Ever heard of the COVID pandemic? It's important to have some cash savings to fall back on when life throws you a curveball.
- Higher Education – Have the conversation about how/who will pay for their college, trade school, etc. Have you been saving for their future education? It best to have this conversation early on, so everyone is on the same page.
- Return on Investment (ROI) – ROI is a general financial concept, but for a teenager heading to college is essential to understand. You don't want to borrow $200k in loans for a career that make $40k per year. That will keep you in debt for years. The goal should be to minimize cost for college and understanding what the job market will look like in four years after you graduate. The goal should not be to pick a college based on the prettiness of the campus, but what makes sense for your career path and minimizing debt. If undecided on a path, community colleges offer a great way to save while your child figures things out.
Finals thought on Bad Parenting – Not Teaching Your Kids
All of these topics and ideas are a suggestion. You know your kids best. You will be your child's first money role model. Make a good first impression. We all want to be a good parent, do don't fall into a bad parenting trap, and not teach your kids these fundamental life skills.
If the above information seems daunting or maybe even outside of your comfort zone, get parenting advice from a trusted source, or increase your financial knowledge. Books, podcasts, blogs are a great way for you to brush up any of these topics.
Raising children will take effort, nurturing, time, affection, empathy, competency, and encouragement. Maybe even a little screaming, frustration and crying along the way too. So do all you can to raise a financially savvy child. They'll thank you for it someday.
Let's review some of the Key Takeaways to cover with your child:
- Increase your financial knowledge first
- Begin teaching your kids about money as early as possible
- Make it normal to talk about money
- Cover has many topics as possible over the years, including:
- Spending, Saving, Credit, Debt, Employment, Income, Investing, and Financial Decision Making
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. I want my three children to handle money better than I ever did at a young age. I have been teaching them as much as I can for the last 10 years. My goal is to continue to champion the financial literacy message and then why I created the “How To Rock Your Money” book. To help teenagers navigate their financial futures. I hope my family’s story of paying off over $100,000 worth of debt will inspire and motivate you to take control of your money. He blogs at BrianBrandow.com