by Farah Merani
It’s that dreaded topic, the one every parent fears but knows they need to address. No, it’s not the birds and the bees; it’s money management. As ominous as the idea might be, especially if you yourself aren’t the most money savvy, it is one of the most important and potentially life-changing conversations you can have with your child. The better the grasp your children have on the value of money and the impact proper (or poor) planning can have, the more comfortable they will be with their own financial matters as adults.
Here are 5 tips to help you get started:
1. Look at your own relationship to money.
Children are incredibly insightful and have tremendous awareness. Just as they pick up what we say, so too do they adopt our attitudes. Set a good example by talking to them in as simple terms as they’ll understand about how you handle your money and be open if you don’t know something. Think of it as a way to learn and spend quality time together.
2. Start with an allowance.
Most of us learn best by doing. Once your children understand the basic principles of monetary exchange (when you have money you can buy things), give them a small allowance in return for homework completed, chores done, etc. Recognizing the relationship between work and earning is very important. As they begin to accumulate their own little nest egg, encourage them to plan for their purchases and consider the exchange value. Do you want to spend 10 dollars on three small toys that might not last a week? Do you want to spend 10 dollars on something with more lasting value? Do you want to spend five dollars on something you want now and save five for something more expensive you want later?
3. Give bonuses.
If your child performed exceptionally well on a test, helped shovel the whole driveway, or simply did an extra chore, offer a little extra on the weekly allowance. Hard work pays off! Before they race off to buy something, talk together about what might be the most advantageous way to deal with the extra income.
4. Save, save, save!
Teaching your children to save at an early age opens their eyes to long-term goals and financial planning. Get them a piggy bank or open a bank account and keep them informed as you monitor how much they’re saving. This is a great opportunity to talk about how they can reach bigger goals by contributing regularly to their savings. And imagine their excitement as they watch it grow!
5. Don’t spend more than you have.
Debt is the scourge of our society, causing not just the inability to get ahead in life but also depression, relationship problems and worse. Teaching your children to live within their means is of utmost importance. As soon as they’re old enough, teach them how paying interest over time makes what you buy cost much more than the sticker price, how imperative it is to always spend less than you make and how saving can help prevent unexpected expenses from becoming catastrophes. This one lesson will be one of the most important you can ever impart.
6. The more you have, the more you can give.
There is great joy in helping others. Encouraging your children to recognize this early on will teach them the importance of charity and benevolence. They may be reticent at first, not understanding why they have to give their hard-earned money away, but soon they will be able to make the correlation between earning, sharing and feeling joy from having helped another.
Finally, positive reinforcement is so important. Whenever your kids make a well-thought-out purchase or reach a savings milestone, take notice and share your delight with them. Perhaps they earn a bonus or something unrelated to money all together. At the end of the day, a healthy attitude to money makes all the difference.