How to Teach the Value of Money to Kids

Over the years I’ve witnessed the offspring of many friends and relatives display an inability to handle money. The number of youngsters I’ve known that grew to adulthood without the ability to make regular payments on their home mortgage, pay their credit card bills without incurring interest and penalties, or even balance a checkbook, is frightening.

Instructions

Difficulty: Moderately Easy

1. Begin your indoctrination early.
   
   There is no more accurate truth than the ancient adage: As the twig is bent, so grows the tree. As soon as your progeny develop an awareness of what is going on around them, they are entitled to instruction and guidance on the realities of the financial world.
2. In your guidance, truly mean what you say.
   
   Whether or not you believe it, your children really pay attention to what you say and do. As the first authority that normally appears, a parent becomes a model on which the child fixates. It’s important to realize, however, that your counsel must be consistent for the lessons to be learned. To preach thrift you must demonstrate thrift. If messages are contradictory, they will be received as mixed signals. Only through precept and example will sound habits be engrained.
3. Avoid spontaneous gift-giving.
   
   Though generosity may seem a fine quality to exhibit, it can become inhibiting. One characteristic that builds financial self-confidence is an ability to establish and function on a budget. Whatever flow of income your offspring regularly receive, they must be given the opportunity to develop competence in the use of these funds. Sensible spending based on predictable income is mastered through practice. Don’t throw a monkey wrench into the works by impulsively dumping extra money into their hands.
4. Don’t fight against human nature.
   
   Consider this bizarre instance, concerning an indolent young woman who over many years repeatedly received instruction from her wealthy father on how to balance her checkbook. She habitually issued checks whenever she chose. When the account balance fell below zero, the bank phoned her father who deposited more money in the account. Somehow her father never understood that his instruction sessions ignored human nature. Human nature dictates that all actions actually have meaning. You must not ignore what is important to your offspring.
5. Don’t direct your child’s discretionary spending.
   
   If a child is to learn about money, he or she must sense some meaningful connection to it. Though it’s the parents’ responsibility to advise their offspring on sensible spending and saving, they must not dictate how the youths handle their earnings. The decision on how money received is to be spent—or horded, if that’s the choice—is that of the recipient.

Tips & Warnings

• The only way that sound financial values can be transmitted from one generation to the next is by a systematic and continuous program that reinforces these values.
• A child’s indoctrination into financial matters must be rooted at home.
• Do not expect your children to learn about finances in school, for the typical classroom teacher is equally mystified by the world of money.