We take so many of our habits, both good and bad, from our parents. When thinking about your spending habits, consider how your parents might have influenced you. Did they give you a thorough education on how to handle your money? If not, how will you make a difference for your children? Here are some tips to teach your kids about financial discipline.
As soon as your kids understand money, you should train them to use it wisely. If they have an understanding of math (at least addition and subtraction) use this to your advantage. Tell them about how much things cost and how much money they have in a given scenario. You should also help them to think about their money every time they want to spend.
Will the purchase be something that satisfies them long-term or be quickly forgotten about? Having these questions on their mind at a young age is very important. An excellent way for kids to get practical experience in understanding the real value of a dollar is having them earn it.
Classic examples of letting them run a lemonade stand, do chores for you and others can be a great way for a child to understand that money is a valuable asset that is earned.
Give Kids an Allowance
Whether you give your kids an allowance for chores or not is up to you. Their compensation shouldn't be provided for just pocket change. However, it should be modest enough to teach them the true value of a dollar. Should they be running out of their allowance as soon as they obtain it, they might not be thinking far ahead. Don't let them come begging for more money after wasting it. They need to learn how much their money should matter.
Let Kids Make Mistakes and Show Them Yours
Kids don't think in the long-term. If they want something, they're going to go for it. Should there be, an impulse buy your child craves and they have the money for it, don't stop them. Instead, let them learn from the experience. Use their wrongful purchase as a teaching point later on.
They can realize how being so eager to spend can cause them to lose foresight. It’s no secret that even if we have excellent financial education as adults, we will still make foolish financial decisions and purchases from time to time. This should not be something that you hide from your kids, instead use this as a teaching point. Many financial mishaps on the adult level, may be too complicated for a child to comprehend fully. Therefore, explain it to them in terms that they can understand and relate to.
Teach Kids about Savings
Saving money might seem like a horrible burden to kids. It can seem like they're money is being locked away forever. Instead, you can use this as a time to teach them about waiting for good things. You could show your children how in your own life there were many times you wanted to buy several small things but instead, you bought one big cool thing. Showing them what big ticket items you have purchased, as long as they’re interesting, can be a great encouragement to keep them going.
A few mediocre purchases made immediately have nothing on one terrific purchase that they waited for. It would be beneficial to most kids to let them pick something out that they want. That way they can have a solid idea of what they’re working for and saving their money for. Doing this will help them pace their spending. Just barring them from spending their money on what they want will feel like a punishment instead of a greater reward down the line. When they grow up and consider things like credit cards, they will likely have a much better understanding of not delaying payments.
Ask for Their Advice
Kids greatly appreciate being treated like adults. When you're at the grocery store, ask for their advice on specific items. For instance, if you're stuck between a quart of milk for $2.25 or a gallon for $3.75, ask which would be the better value. You can also ask them about if you should or shouldn't purchase it, and why. Listen carefully to their reasoning. There's a good chance they might be spreading your wisdom to their friends. With enough effort, you could be inspiring a new generation of money-smart kids.
Financial discipline isn't about becoming rich. Someone who is a millionaire could be in dire straits, while someone who earns a more modest salary could be doing great. It's all about planning and being aware of your spending. With these tips, you can set the best example possible for your kids.
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