Whatever children learn about money in their early years is usually carried with them throughout their adult life as well. This means that what you are teaching them now about finances will probably shape their decision-making, and therefore their lives for decades to come.
For instance, I was raised in a family of eleven where my mom stayed at home to take care of the kids and my dad was a teacher that never made more than $45,000 a year. We barely “got by” most months and we all knew it. I can remember that every penny was valued as something essential for our survival. Because of this, as an adult I continually save and don’t spend money unless I have to. I’m like Mr. Howell from the television show Gilligan’s Island: I like to have money, but I never like to let go of it.
To help educate your children about money, here are ten things you can begin to teach them early on.
How to Earn Money
Some parents may disagree, but for younger kids a weekly allowance can be a very good thing as long as it is not excessive. By having an allowance in place, you can teach your kids to be responsible for their spending. You will no longer have them running up to you at the store asking if you can buy them something. Their allowance is their money to do what they wish, but there are no handouts (or bailouts!) afterward. They will have to carefully decide if they want to spend their whole allowance at once or save it up for something down the road.
Make them earn it. Unless it is a birthday or holiday, never just hand your child money until they have earned it by doing some chore or job that you need completed. It will teach them to have a good work ethic early. If they can’t do the work, then they should not expect any sort of compensation.
Different Jobs Earn Different Pay
Just like in the real world, everyone’s job pays differently. All honest work is honorable and valuable, but a waiter simply does not earn the same salary as a doctor. Create a list of jobs your kids can do each week and then pay them once the job is completed successfully. For example, taking the garbage out every week might earn them fifty cents. For a couple dollars a week, they can walk the dog every morning. Once they sign up to do that job, they must complete it or their pay will be docked at the end of the week and given to whoever completes it.
The Benefits and Costs of Working a Job
Encourage your teenager to get a part-time job to open their eyes to how the real world operates. They will have a schedule and a boss (other than their parents) that will hold them responsible for their work. They will pay taxes which is a huge eye-opener for kids. This will influence their thinking about employment and money in a practical way. It may even encourage them toward a unique career path or entrepreneurship.
How to Create a Monthly Budget and Plan Ahead
It is amazing how many adults can’t create a monthly budget. Don’t let your child fall into this trap. For example, if they earn $50 a month through their allowance jobs, help them create a budget detailing how this money will be spent. It will show them exactly where their money is going every month and how they might be able to cut down on some expenses. Create with them a roadmap to financial stability and freedom. Dave Ramsey has some great material on this subject and more.
How to Save Money
If the current epidemic has taught us anything at all, it is that not enough people have built up any sort of savings to survive on. A few weeks of no paycheck has led millions to file for unemployment as they are unable to pay their rent or mortgage for the month. Don’t let this happen to your child. Teach them to put away at least ten percent of their pay every week.
How to Set Up a Bank Account
While they can have a piggy bank at home to drop their change into, it would be a good idea to bring them to the bank and show them how to start up their own savings account. In fact, maybe you can start them off with ten dollars (or the minimum the bank requires) and show them the interest they can eventually make on the money. As they get even older, you can introduce them to your financial advisor, and they can learn about mutual funds and stocks.
How to Be Generous
Kids are naturally selfish. Well, we are all naturally selfish. But that isn't who we are called to be. Teach your children to be generous and give a portion of their earnings away. Whether to church, a charity, or a friend or neighbor in need, this valuable lesson will stick with them as they grow older. They will see money as a tool to bless others and not merely as a way to enrich themselves and serve their own desires. Model for them that money is important, but people are more important. This way they won't hold tightly to it or strive hard after it and make it an idol.
Making Big Decisions With Money
Every parent has hopefully started a college savings account for their kid while they were still young. If not, start now! But you don’t want to just hand them this money at the age of 18. Let your child know during their freshman year in high school that you will have a set amount saved for them by the time they graduate high school. Instruct them to plan wisely as this will be the only money they will be receiving for college from you.
Point out how they could go to junior college for two years and save themselves tens of thousands of dollars in the process instead of going to a university or private college. Detail to them how they could work a part-time job to pay as they go, or try to earn a scholarship with their work in high school. They could then use their college fund to help them buy a house sooner rather than later in life. By getting them to think about these decisions early on, they can start setting goals immediately and develop a long-term approach to their financial future.
Warn Them About Credit Cards
The average American has a principal credit card debt of about $9,000. In reality, the debt is actually a lot more as interest is applied every month on top of it. This is the worst kind of debt to have as it is high interest and difficult to pay off. Teach your child that credit cards are only to be used in rare circumstances and that they should only carry one credit card. Most people have about four different credit cards in their wallet which can lead to irresponsible spending and excessive debt.
Build in Them an Entrepreneurial Spirit
As I said earlier, perhaps with your guidance your child will go on to become an entrepreneur. Start little businesses with them while they are young and show them the work it takes to earn a buck. For example, a lemonade stand during the summer or a dog walking service could lead to them running their own adult business someday. It isn't easy being an entrepreneur, but it is rewarding. They may love the freedom that comes with "being their own boss," even with the inherent risks of business ownership. These are great lessons to open up our children's minds to what they can to do contribute to the world around them.
These are just 10 examples of things you should teach your kids about money. There are many, many more, but start small and build up their financial education as much as possible. This wisdom will be a huge blessing to them and their family long in to the future.