One of the most common complaints I hear when I talk about teaching kids how to manage money is this:
“How can I teach my kids how to manage money when I don’t even have my own financial crap together?”
This is a valid question. Kids tend to learn via watching your examples, and “Do as I say, not as I do” generally isn’t a very effective method of teaching children.
In fact, in my experience, it’s quite common for kids to have an “If mom or dad did it, it’s okay for me to do it” attitude.
So how can those of you who are struggling to overcome your own money management faults teach your kids to do better with their own money?
Let me share my own experience in this arena.
When we first started our financial journey to get out of debt, we had over $60,000 in consumer debt and a bloated mortgage. Our situation was so bad that we were in the hole between $1,000 and $1,500 every single month.
Yet all four of our kids are turning out to be very financially responsible. They’re good savers, and they weigh purchases carefully before spending.
Check out the tips we used to teach them financial responsibility in the midst of our fiscal irresponsibility.
We Fessed Up Regarding Our Situation
The first thing we did with our kids when we realized our finances were major league out of control was to confess the situation to our kids. We sat them down, told them the stark reality we were facing, and said to them that we, as a family were going to be making some changes to improve the situation and get out of debt.
We also apologized to them for getting into the situation and told them that it wasn’t responsible for us as parents to create such a mess.
This “confession time” helped them to:
- Know that parents screw up and sometimes need to rectify mistakes.
- Gave them a clear message that our irresponsible money management and accumulation of debt was not okay.
A couple of the kids were empathetic with us, a couple were angry. We took it “like a grown-up” and held ourselves accountable to ourselves and our children for the situation.
We Made a Plan to Change Things and Involved the Kids in the Process
The second thing we did to teach our kids how to manage money
in the midst of our financial irresponsibility was to commit to making a plan and following through with it.
We also created a spreadsheet where the kids to see our progress and our monthly spending. We made it clear that we were still in charge of how money was spent, but we also welcomed their feedback on expenditures they thought were frivolous.
This helped them learn as they taught us, and in return, we could share what we learned along the way as well.
We Were Honest When We Fell off the Wagon
There were a few times during those worst money management years when we fell off the wagon and threw our budget to the wind.
When that happened, we were honest with the kids about it, and we apologized to them as our money situation affects them as well.
This helped the kids see that mistakes are a part of life and that the only thing you can do after making them is vow to do better next time and to work to repair the damage.
We Taught Them how to manage money as We Learned
The fourth thing we did to teach our kids how to manage money in the midst of our financial mess was to teach them the good stuff as we learned it.
We taught them about the importance of regular savings, the importance of avoiding debt, and the value in planning for future expenses. Every time we learn something new about money management, we share it with the kids as well.
This helps them to see that learning is an ongoing process for everyone and that no one ever gets to the place where they truly know it all.
Teaching your kids good money management skills when your finances are a mess can be difficult. Still, if you’re willing to start making changes for the better with your money, you can bring your kids along for the ride and help them to learn about proper money management as you fix your money mistakes and create a better financial picture for both you and your kids.
I’m happy to say that all four of our kids know more than the basics about budgeting, saving, spending, and investing – probably much more than they want to know. 😊
But I believe that by taking them along for the ride – even though we started out in a huge financial mess – we helped them to see that everyone makes mistakes (even big ones) and that by acknowledging those mistakes and committing to overcoming them, redemption can happen.
By helping your kids to learn about financial literacy, you’re setting them up for a stable and sound financial future.
Teach Kids How to Manage Money (editors note)
Like Lauries's family, my family was up to our eyeballs in debt too. Over the first ten years of our marriage, we had accumulated over $100,000 in consumer debt.
We systemically overspend week after, week, month, after month, year after year using credit cards to spend more then we made. We felt this behavior was normal. Everyone carries debt, and so would we.
Our three kids had no idea all the money mistakes their mom and dad were making. It wasn't until we hit rock bottom moment with our money that we began to look to increase our knowledge on the topic, and begin to clean up the mess.
Part of that clean up was a family meeting, and admitting to or children that we did not know how to manage money, and needed to do better. We explain everything, how much debt we had, how much money we made, and the cost of all of our bills. We begin to involve our kids in budget meetings.
It was a good experience for all three kids to be a part of. They saw the highs and lows, and how accumulating debt can affect the family dynamic and your overall financial lives. It was a real-life crash course on how to manage money.
All three children are old enough now to earn and manage their own money. Although they all handle their money differently, they have more knowledge in their young lives, then we did at their age. So far, so good, they have not taken on any debt, and each has modest savings.