One question I like to ask people when I teach a live class or a webinar is, “Are you happy and satisfied with where you are financially?” Most audiences respond with an overwhelming, "NO!" I like to follow this question up with, “If you aren’t happy or satisfied, what are you going to start doing differently so you will be?” This is an excellent question for you as well.
But, this post isn’t about you or me. It’s about your kids. If many people aren't satisfied with their finances, it's essential to fix that, not just for us, but also for our kids.
We’ve all made mistakes with money, myself included. I have done some seriously dumb stuff with money and debt—things I would never want my son, Noah, to do. As parents, we have to talk about this stuff, but we have to be a living and breathing example of how to handle one of the most essential tools in our lives. They are watching everything, and if you're irresponsible with money and debt, it's likely they will pick up on your bad habits. I'm sure you don’t want that, and I know I don’t want that for my son.
I want to share some of the most important financial tips you can teach your kids. There are obviously more, and depending on their age you may decide to dive deeper and expand on some of these topics.
Talk about money.
For many people growing up, myself included, money was a private matter. “We don’t talk about money.” I think this is a terrible approach. You should talk about money with your kids. Money is a medium of exchange and is connected to every area of our lives. Money fights and arguments are one of the top reasons for divorce in this country. If you don’t talk with your kids about money when they are young, how do you expect them to know how to communicate about it when they are older? The next few tips we share can be used when discussing personal finances with your children.
Money equals work.
Money doesn’t come from a magical ATM. It doesn’t come from the money tree in the backyard. Money comes from hard work and providing value. Providing value is the most important lesson here. The more value you provide, the bigger challenges you can solve, the more money you will be able to make. You can teach them this by giving them work to do around the house. Sure, there are some things children need to do because they are part of the family. But give them extra stuff to do that can earn them money. If they do the work, and it was done exceptionally, pay them. If the work doesn’t get done, they don’t get paid. Imagine that, just like in real life.
Show your kids your financial life by using budgets and cash flow plans. There's not a better example of real life than you. Do you have to be perfect at personal finance? NO! You can show your kids the concept of money coming in, and money going out. As an adult who makes money, you should have a basic household budget. A budget is one of the best tools you can teach and share with your kids. Show them how much things cost like utilities, insurance, food, rent/mortgage. Also, and possibly the most crucial part of the budget, show them how to save first, and not spend more than they make.
Pay yourself first and saving.
I just alluded to this, but you should teach your kids the importance of paying themselves first, then paying all of their bills. Many people get this backwards. We pay everyone else, then we keep, or worse, spend everything that’s left, and we don’t save money for emergencies or the future. Paying yourself first is one of the best principles you can instill in your children. If and when they make money for doing work, you can teach them this very simple, yet valuable tip that will ensure they have a very prosperous future.
Building wealth, and having success with money takes time and patience. It doesn’t happen overnight. Those who take their time, win in the long run. Many kids, including mine, aren’t very patient. They get that money in their hands, and they have to spend it right away on a bunch of junk that they don’t play with after a few days. This is a great time to teach them the value of saving. Saving will show them patience and allow them to buy something even better in the long run. Depending on the age of your child, how much and how long they save will vary.
The best way to teach contentment is to be the very best example to your kids. Contentment is a topic I'm always talking about with my son. As a kid, he sees all sorts of things he wants to do when we are out and about. In many cases, his requests are met with a solid, “NO!” These are great teachable moments to remind him that our household runs on a budget and a plan. What he wants may not be in the budget. Usually this is followed by some whining, which is normal for many kids. I take the time to remind him about other activities we did or are going to do. I also explain that he shouldn’t worry so much about what he doesn’t have, but focus on all the great things he does have. This is a challenge, no doubt! But if you teach this message consistently and live by it yourself, your kids will learn the value of being content. Plus, if your child is making money by providing value around the home, he can start to use his own money to make purchases.
Teaching children to be givers is important and it can be taught at a very early age. Giving is a lot of fun! Whether we give our time, talents, or money, it can be one of the most rewarding and fulfilling things in life. People who give are less selfish; they are likely to be happier, they are more pleasant to be around, and brings even more purpose to our work and our lives.
If money, budgeting, saving, and talking about personal finance isn't your forte, it might be time to learn more about it. Not only will it benefit you and your financial life, but sharing these vital money principles will certainly help your kids. To learn more, you can check out our website, pick up some personal finance books, or even join our membership site, Roots of Personal Finance. These are great resources to help you learn more about the subject of personal finance, which help you and your family!