Think back to the effort, patience, and time it took to potty train your beautiful toddler. Remember the effort, patience, and time it took to teach your child how to ride a bicycle, skate, or swim. Money management is the term for a whole bunch of individual skills wrapped up in one neat package. But each of the skills needs to be introduced, practised, and reinforced. And each takes time to acquire.
By the time your children go to university or college, they will have already learned a lot from you about money. Even if you choose not to take an active role in teaching your children about money, they will learn most of what they take into their future lives from what you do (as opposed to what you say). If you save regularly, they will see saving as an important part of money management. If you are an avid investor, they will develop an interest in investing. If you regularly donate to charity, your children will learn to share. An honest, straightforward approach to explaining money matters works best. Don’t take the easy way out. “I don’t have the money to buy you that thingamajig” as a pat answer to each request teaches little. Instead, use each opportunity to teach the important lessons of budgeting, relative value, prioritizing, and patience.
Your kids will know whether you are an impulse shopper or a planned spender, whether you are generous or miserly with your money, whether you see money as a tool or as a god. If you comparison-shop, they will learn from you. If you place a strong value on expensive brands, they will hear your message, even if those messages are mixed.
From early on, children receive multiple messages about money. At home they hear one thing; at school and among their peers they hear another. Mom does it one way; Dad is the complete opposite. What is consistent is that nobody seems able to agree on the money rules. And often those mixed messages stay with kids long after your parental influence has passed.
I knew a couple who were distinct opposites when it came to money. The father was a generous spirit who bought on impulse and loved to satisfy his children’s every wish. The mother was a tightwad, begrudging most spending. The father’s attitude was, “Money is a tool for making our lives more comfortable.” The mother’s attitude was, “We don’t have enough money.” The father gave his children money to buy gifts for loved ones. The mother expected her children to fund their gift-giving themselves. The messages this couple’s children received were very mixed. While that’s pretty usual for many families, it doesn’t help to promote learning, since inconsistent messages are confusing for children. If you are teaching your children about money as a couple, it’s important you develop a joint plan about what you will teach.
Differences in style are natural. How you demonstrate those differences to your kids will have an impact on the lessons they eventually put to use in their own lives. Talk about how you want to teach your children the important money lessons. Starting from a shared belief—even if only in the basic ground rules— will go a long way to delivering a consistent message to your children. If you’ve decided not to leave your children’s financial education to whoever comes along with a good story to tell, if you’ve decided you want to pass along your values, if you’re determined that your children should not make the same mistakes you did, then you’re ready to step into the role of raising Money-Smart Kids.
Your Role in Raising Money-Smart Kids
Here are 10 simple rules that apply not only to teaching kids about money, but also to teaching kids about life.
Rule #1: Remember that your children are always watching you. You know that old saying, “Do as I say, not as I do”? Well, kids learn from what you do. Shop without a list, and they’ll learn that when you go into a store it’s okay to impulse shop.
Rule #2: It’s just as easy to learn bad habits as good ones. Browsing serves a purpose. Unfortunately, in our time-pressured world, we haul our kids in and out of stores, seemingly without purpose, always buying something. If you never leave a store without buying SOMETHING, your kids will quickly learn that their purpose in going into a store is to find something to buy. You can’t then turn around and say, “Do you think we always have to buy something?” Because the answer is, “Yes.” That’s what you’ve taught them. A bad habit. And all because you didn’t follow . . .
Rule #3: Explain everything you’re doing. Yes, it can become tedious, so it doesn’t have to be EVERYTHING, just most things. You can’t take cash from a cash machine without explaining how it works or your kids will think, “The machine just gives you money.” You can’t write a cheque without explaining how it works or your kids will think, “Cheques are money.” You can’t leave a tip on a table without explaining what you’re doing or your kids will think, “Mommy forgot money on the table. I better pick it up.”
Rule #4: What goes around comes around. If you’re truthful with your children, you have the right to expect the same from them. But if you lie, obfuscate, and only tell part of the story, why would you expect any better from them? Think you can pull one over on your kids? Go back and read Rules #1 and #2 again.
Rule #5: Keep it simple. The more complicated you make something, the harder it is to learn. Complicated rules for how kids can get and use their money are hard to understand and keep straight. The reason the Magic Jars work so well (for both kids and adults) is that the system is simple to understand and easy to use.
Rule #6: Don’t try to do too much at once. Kids need down time to just hang, think, imagine, process, cope. Jamming a whole bunch of money lessons into a day, week, or month won’t work, since time is important for practising and processing.
Rule #7: Prepare your kids. Telling your kids what you’re going to do helps them create a mind-map of what’s going to happen. Ditto teaching them about money. Lay out what you’ll be teaching them before you get into the actual lesson so they know what to expect. If you’re going to talk about allowances, tell them you’re not going to get into loans, advances, work-for-pay, or all the other stuff that can make the discussion really complicated—you’re just going to be talking about how much, how often, and what they can do with their money.
Rule #8: Be prepared. Just as you wouldn’t dream of heading out without a bag of cleanup stuff and a set of nibblies to hold your child’s hunger at bay, you also have to be prepared when you’re teaching kids about money. Don’t try giving a kid her $7 allowance using a five and two loonies. How will she put away her 70¢ for saving, or divvy up money between her planned spending (for that new CD) and her mad money?
Rule #9: Routine is your friend. Keep switching the day when you give the allowance and watch your kid eye you suspiciously. Forget to give the allowance and you’ll prove you’re not trustworthy. Change the rules on how the allowance can be used based on every new situation and you’ll teach your kids that they can change the rules too—as long as they can come up with a good justification!
Rule #10: Know when to let go. It’s not worth all the hassle to get on your kids’ cases about everything. Know when to let things go and just relax. As long as you deliver a consistent message, love them, and have their best interests at heart, they’ll turn out fine. If you’re doing anything “because of the principle of the thing,” it’s because you’re too lazy to weigh each decision on its own merit.
Children progress pretty quickly from bubble gum to fancy jeans. While the dollar amounts they spend rise dramatically as they age, their respect for money doesn’t automatically increase proportionately. Only by helping them to learn the important money lessons will they develop the appropriate attitudes towards money. Good luck, and remember that lessons learned with laughter last longer!