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Teaching Your Kids About Money

You might be thinking, "Isn't there enough to do as parents without training my kids on money management?" We all know parenting isn't easy, but let's face it, kids need help to develop good money discipline. Although many schools teach basics such as how to write a check and keeping a check book record, it just isn't enough in today's complicated world. We don't know of a better way to pick up some proven pointers than from a family that has been putting them into practice. Scott and Jenny's children are now in high school and college. They shared with us a few ideas on what has worked for them through the years.

"Make an allowance meaningful," was the first tip from Jenny. This means it needs to be large enough that your child can buy something without hoarding for weeks. For grade school children it might be $5 a week, middle school might be in the $10 - $15 range, and high school $20 - $25. Scott chimed in his belief that children should connect actual household chores with their allowance. He felt it helped them understand the future concept of work and compensation.
"Encouraging saving" was next on their list of suggestions. Although they didn't force their children to save, Jenny and Scott talked frequently about the value of saving and setting larger purchase goals like a Play Station game or as they became teenagers, their first car. They helped their children set specific savings' goals each year and talked through how they were going to achieve the goal...by saving a percentage of their allowance, or when they started earning money a specific amount each payday.
"Use real life examples to teach them." Scott remembers, with a laugh, how he took several credit card offers received in the mail and used them to explain things like annual fees and interest rates. According to Jenny, "the most valuable part of that discussion was teaching the kids that you have to pay back what your charge. They had the idea it was free money."
"Including them on important family money decisions is another way to teach them about tradeoffs and value," stated Jenny. Examples the two parents cited were including the children in buying their family computer, deciding what charities to support, and discussing how the family was going to pay for college bills.
"Have them share in purchasing their first car." Scott and Jenny decided that each of their children would have a car when they turned 16, but it would be a joint purchase. "We didn't want to just give it to them, or make it entirely their responsibility. Our deal is to provide a matching amount to what each child could save and afford to buy," Scott explained. "It was pretty amazing to watch the kids calculate what they could afford and begin to understand that the more aggressively they saved the more Mom and Dad would be chipping into the pot."

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