As a parent, how are you assessing, and ensuring, that you’re passing along the correct financial skills to your children? Are you raising children who will be sloppy in the way they manage money? Remember that children see almost everything. They don’t do what they are told but rather emulate what they see, so it’s critical to ensure you model a financial structure worth emulating.
It is normal to struggle with your own economy, even as a parent. The important thing is to show your child the value in setting goals, saving and spending. Educating your children through your actions is about more than just telling them how much things cost, or answering questions such as, “are we rich?”.
It is about being a positive example: paying your child’s allowance according to your agreement, saving for purchases and avoiding over-spending. It makes sense when you think about it. We have all been on the receiving end of lip service (sometimes even from our own children), so we tend to value action over words.
Words are easy to speak, but action is far harder to fake.
Teaching the basics
The benefits of teaching your children about money early on can pay dividends both immediately and in the longer term. In the short term, children may develop strong saving habits, learn how to make smart purchases, begin to understand the true meaning of “investment” and perhaps even learn why they can’t immediately get everything they want.
In the long term, educating children about money can help them avoid debt as adults. And by teaching children the value of saving for the future at a young age, you can help them establish the groundwork for a lifetime of financial security. There are many lessons one can implement immediately, and a simple Google search will help you on your way. For this article, I’d like to focus on budgeting and spending.
Budget and spend together
Budgeting doesn’t have to be a solitary act. Instead of balancing your monthly budget alone, invite your child to watch you go through the process. Explain how to take stock of how much money is coming in and going out of the household for that month, and how you plan your spending, so you don’t run out of money.
This will help your child see that your pockets are not an endless source of cash. It takes careful planning and discipline to make sure you’re living at or below your means. If your child receives an allowance, this is an additional opportunity to show him or her how to budget and spend responsibly. Once the budget has been drafted, pay bills together. Even this mundane task is a valuable teaching moment. Explain the importance of paying bills on time and in full and how late payments can impact your credit score.
A parent’s responsibility
I love being a father to my two girls. It’s incredibly rewarding, but it is even more work. It’s my responsibility to teach them to be good citizens of the world, and the best way to do that is by demonstrating good behaviour. Money is never a taboo subject in our home and I always strive to make sure my words and actions are in alignment. Because when they don’t match-up, the girls always notice and rightfully call me out. They will be great future financial role models to their own children someday and that makes me feel good.
I ensure the future success of my bloodline by investing time in teaching my children the correct financial behaviours. If I don’t do this, why then would it matter if I’m wealthy or not? If I am wealthy, they’ll soon misuse their inheritance and deplete the “family money” due to not having the necessary skills to manage that inheritance appropriately. If I’m poor, they will most likely also remain poor because they’ll lack the skills to manage their funds, dig themselves out of poverty, and do better for their children than I did for them.