How to Raise Financially Responsible Children
Every parent wants only the best for their kids. Be it getting the best education of all, having a safe place to live, or making sure that they aren’t hungry. These are great goals to strive for, but let’s not forget about financial success. After all, money is and will be what we use to exchange goods.
Before moving on, by financial success, we’re talking about being financially independent and responsible enough to one day pass on this knowledge to their children. Most schools don’t teach children how to manage their finances properly, hence this responsibility falls on the shoulders of parents.
With that being said, as parents, accept this challenge with gusto and view it as an opportunity to teach them the lessons we had to learn the hard way. Give them the gift that will benefit them for a lifetime. Here’s how.
1. Talk about money
Teaching children about money and financial responsibility starts at an early age. In fact, as early as you can so that your kids don’t have to unlearn any bad habits.
It doesn’t mean that we should pass some of the stress on to our kids but you have to at least chat about how to budget, saving for retirement and how to pay the bills. Help them understand that money is hard to come by and easy to flow away. That there is a cost of living.
It seems oversimplified, but that’s what finance is about — simplifying. The real value of money is how much freedom do you have to do what you want, not how many items you can collect.
2. Talk about family finances
This is taking the next step after talking about money. Let your children into your discussion, regardless if they can contribute or not. Not including them in your conversations about money only leads them to draw their own conclusions, which may not be accurate.
Be open about what your family can afford and cannot. Talk about how you’re planning your family budget, as well as some goals to achieve. Above all, discuss college expenses long before they even think about it.
That way, by being transparent and showing all aspects, your children will see the struggle and sacrifices along the way. This will inherently teach them about the value of money.
3. Involve your children in decision making
Children learn the concept of money from their environment. That means the decisions of their parents, both big and small. Involving your children in financial decisions simply means showing them you recognise the price and the value. And the concept of “price doesn’t equal value.”
The knowledge of how to invest or manage our money doesn’t come naturally, it takes time, even merely to build a solid foundation about money.
Start with handing them the cash to pay for an item. The act of exchanging money and change, even if it’s not their own, will help them understand nothing comes free in this world. It might seem absurd to us adults, but children don’t know that yet.
4. Give them real money to manage
From the book Raising Money-Wise Kids, Judith Briles pushes parents to give their children hands-on experience with money. That means providing them with a certain amount of allowance and actively coaching them on how to manage it. Or, it could even be giving small and menial tasks to your children in return for some money.
But regardless, allowing your kids to use the currency we are using gives them the opportunity to learn about the consequences of their choices. Also, give them some room to make mistakes, help them understand the things they could do with their money such as saving or investing it. More importantly, help them understand what it means to be without the money.
Build their financial muscles.
5. Be a good role model
Children mainly learn through mimicking. And being surrounded by their families means that they’ll constantly be observing the parents’ actions.
Lead by example. Don’t do it and tell your kids not to do it, because then they’ll do the same and tell their kids the same thing.
Practice good habits. For yourself, and for your children. Show them the struggles of the family’s finances. Show them the hard work that goes into making money. Show them your budgeting plans. And finally, show them how they can do it too.
Related: 5 Ways To Control Your Family Budget
We all know the real world is tough. So instead of buying your kids the things you never had when we were younger, teach them the lessons you were never taught.