Teach your children the financial planning process even when they are very young
Teaching money principles to your children is a vital part of guaranteeing them better results in the world of future finance
Your children may be too young to follow Google finance or read a financial review, but they still need to learn how to prepare for their future. School teaches the basics of reading, writing, and arithmetic, and colleges and universities are supposed to provide career training. It is up to you to show them the basics of the financial planning process even when they are very young. Even if you haven’t been particularly successful with your own finances, you still bear the responsibility for teaching them money sense. You can start when they are very young, by showing them counting money worksheets, and as they grow older you can teach them more complicated principles of global finance.
There are three basic lessons that parents should teach their children:
Money isn’t free
Children need to learn that money is earned, not given freely. There is a difference between a parent’s unconditional love and the generosity of a bottomless wallet. An allowance, given without any strings attached can be considered the equivalent of welfare. Instead of giving an allowance, consider instituting a “Wisconsin Plan”- making cash payments in exchange for a service (chores around the house, grades in school, etc.). This way children will begin to internalize that money needs to be earned. Hopefully, this will cure any cases of unending “gimmies.”
Gifts are fine, but they shouldn’t become the only way your child receives cash, otherwise gratitude may be replaced with a sense of entitlement.
Life requires money
There’s no free lunch – everything requires money. But we don’t need an endless amount in order to meet our needs. Teach your children about making choices. Just as they choose one activity to spend their free time, they can’t do every activity they want. They need to make choices how they’ll spend their money; they can’t have everything they want.
Don’t spend it if you don’t have it
Avoid overdraft like the plague. Save first and then spend. When you send your children to the market, make sure they have money and don’t put it on tab. Having a physical exchange helps reinforce the concept that payment is required for goods. Teach saving habits early so later on when the stakes are higher, savings is second nature.
Adults know that there is a direct correlation between work and pay. It’s time that children know that too. If the lesson is taught right, hopefully your children will never be on welfare. (For more on this subject, read my article on Infobarrel, “Gifting Money to Children-Right or Wrong?”- http://www.infobarrel.com/Gifting_money_to_children__Right_or_wrong)
Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.