Question: How can I help my children develop better financial attitudes and habits?
Jennelle N. in Laredo, TX
Answer: We can help our children develop a healthy relationship with money using some pretty simple (and fun) tactics. The activities and lessons we can teach vary by age, but starting early can be extremely beneficial. Ultimately, there is no better teacher than experience.
That’s a great question! While every child is different, let’s review some general guidelines for talking to children about finances at various stages of their lives.
Early in children’s lives, up to the age of eight or so, they are in observation mode. It’s critical that what we do and say during these years builds an understanding of important, healthy personal finance behaviors, as well as a belief and confidence in their ability to succeed. We may also want to eliminate behaviors that disempower your child, like relying on chance (gambling and lotteries) or fate (idolizing the famous).
As they enter the “tween” years (ages eight to twelve), they need to be given opportunities to provide input and make very basic financial decisions that affect them directly. If we’re going to give a child an allowance, it is during this age that I suggest we start doing so. Why not earlier? Because before the age of eight, children have no real concept of the value of money. If they can’t count to a thousand or know what a million is, they’re probably not ready to handle various quantities of money. However, if earlier in their lives, we give them dimes and nickels, and quarters to spend on various candies or toy dispensers, they will be more likely to understand what coin gets them the bigger or better toy. However, during the tween years, besides an allowance, parents, grandparents, and other adults need to allow children to begin making some of their own small financial mistakes. This is one of the most difficult lessons that we, the adults, need to learn as well.
Virtually all of us learn a great deal from our mistakes. If we don’t allow children to make mistakes with a small amount of money (say, wasting it on a piece of candy rather than saving it to get the toy or game they really want), then they will be ripe for making huge financial mistakes when they head off to college or move out on their own (say, maxing out a credit card or draining their checking account for an immediate want rather than for their established financial priorities).
For our teens and young adults, our challenges as parents and influential adults become even more critical. We have a tendency to want to fix all of their problems or make sure they avoid them. We want them to focus on their schoolwork, so we often discourage them from getting part-time jobs that would detract from their homework, sports, and other school-related activities. While there are studies that indicate college students working more than twenty hours per week are less likely to graduate, I believe that having a part-time job, which does not interfere with coursework and study time, will actually increase enrollment retention. Anytime we invest our own time and efforts into an activity, we’re much more likely to see it through.
To summarize, there is no better teacher than experience. From a young age, children need to be working toward financial success (and experiencing small financial failures) so they will be better prepared to live independently and self-sufficiently. Our role, as influential adults in their lives, is to model healthy financial habits and attitudes, teach them directly and indirectly about being a consistent saver and a wise consumer, and show them what we mean by budgeting, managing our money, planning for the future, setting limits to our spending, and preparing for future purchases.
We will never regret the time spent financially mentoring the next generation. However, we will always regret neglecting such opportunities.
I do encourage you to take a look at the Money Fit Academy. You’ll find beginner-level items such as currency flashcards, calculators, and courses designed to help young adults understand the concept of money management.
Do give us a call if you have any further questions! You can reach us at (800) 432-0310.
Best wishes! Your desire to teach your children about personal finance is commendable!
Education Manager and Facilitator of the Money Fit Academy