Raising three young boys, my wife and I understand the need to teach by example and instill traits that will assist with them living a happy, responsible, and fulfilling life. While pushing boundaries is expected, specifically the 3-year-old, some aspects of life are much easier to teach than others, i.e. wearing a helmet, not running with scissors, taking baths and brushing teeth daily, etc. One behavior that is not as straightforward is becoming a financially independent young adult. Financial literacy for our children is critical. We live in a fast-moving world with very easily accessible “influence”. Even at a young age, the amount of marketing our children are exposed to is endless. Conversations with your children should start as soon as, if not before, that first Target trip where they breakdown over not being able to get that new Nintendo DS game, monster truck, or stuffed animal. Below, I have some tips to help adults encourage financial independence and help our young leaders to make sound financial decisions:
- Start young but keep it fun and age-appropriate
- Gift your toddlers and preschoolers a cool piggybank to show them how savings works. Let them count the coins and dollars before they put them away for safekeeping.
- Elementary aged kids can start learning the power of earning money. Introduce them to some household chores and small jobs. Encourage them to look for additional money making jobs at your friend’s homes. Coupling this with the act of saving will promote financial responsibility and allow them to purchase something with their own money.
- Teenagers will take the next step and save their funds in a checking and/ or savings account. For one of their early teen birthdays, open up the accounts at the same bank you use and gift them a starter amount of money to get the ball rolling. Consider a “matching” percentage on money saved if financially possible.
- Don’t hide money conversations (as long as it’s appropriate)
- Discuss budgeting, the cost of goods (groceries, gas, utilities, etc), why you make certain financial decisions, and others while around your kids. Focus on the why’s and why not’s, not just dollars and cents.
- Don’t shy away from saying no if a request is not in budget. It is very easy to give in and buy what they want, but it is much more impactful to say no and explain why.
- Raise an entrepreneur
- Support your children’s efforts to increase their earnings during the summer or winter breaks. Help them start a snow shoveling business for neighbors nearby or provide help to spread their name for a dog walking business.
- As a small business owner, the financial literacy they learn will be necessary, but the other qualities of confidence, respect, and discipline will be priceless.
- Introduce credit scores BEFORE credit cards
- Before the subject of credit cards come up, make sure your children understand not just the benefits, but also the drawbacks, of using unsecured credit.
- You can pitch this as a 1 step forward, 10 steps back scenario. Credit can be useful, but digging a big hole when it comes to your credit score could be life altering.
- Preach financial gratitude
- Focus on what you and your kids have, not what they want. Impulsive spending, lack of contentment, and lifestyle creeps create a very slippery slope and getting off this slope is made even more difficult the more money they make.
- Raising your kids by teaching through example will help them understand the value of strong relationships, good experiences, and financial well-being.
Overall, raising strong, independent financially literate children comes down to communication. While there may be plenty of conversations parent’s shy away from, discussing money should not be one of those. The sooner you get your kids on the right track the less you will have to worry about them as they get older.