There’s an often misquoted Bible verse which has turned many parents against educating their kids as to the value of a dollar, and it is, “Money is the root of all evil”.
What was actually written was, “The love of money is the root of all evil”, but we’re not trying to run a Sunday School here – we just wanted to point out that assumptions about things can be very damaging.
And in the case of dealing with cash, those assumptions could potentially lead your children to living a life of poverty, or abundance, depending on what lessons you teach them.
Something fascinating about child psychology is that the basis for your adult personality has been pretty much set in place by the time you’re between 7 and 10 years of age.
That means any lessons your kids learn (or don’t) by that age will stick with them for the rest of their life.
So, how do you actually teach kids good money habits?
1. Adults Go First
And by that we mean that most parents have terrible money management skills. You think we’re way out of line suggesting that?
Okay, maybe you can explain why the average American has almost $22,000 in unsecured debt to their name?
Your first goal should be to learn the basics of personal finance yourself, and then pass that knowledge on to your kids.
There’s little point in telling them to be prudent and save some of their weekly allowance if they see your car getting towed because you kept missing payments.
Start out with Dave Ramsey’s “Total Money Makeover” just don’t buy his “rice and beans” shtick – it’s not literal.
2. Teach Delayed Gratification
Our society has rapidly evolved into having what we call “microwave expectations”. All desires and goals need to be delivered right now, piping hot and ready for consumption.
Except that’s not how real life works, and it’s also why giving participation trophies is a terrible idea.
As horrible as this might sound, kids need to learn that they cannot have anything they want by simply demanding it.
To quote Starship Troopers, “Something given has no basis in value” – you can hate Robert Heinlein but it’s difficult to disagree with that sentiment.
Teaching your kids to save up at least a portion of what that new games console costs will help them develop positive habits.
You can start by simply showing them that waiting in line patiently at the bank is what regular folk do. Or to wait their turn for the swings in the park.
3. Involve Them In Your Decisions
Taking your kids grocery shopping is a nightmare most parents do their best to just tolerate or avoid.
But their antics are usually caused by the fact they don’t understand why grocery shopping is so important.
So why not show them?
Bring them to the snack aisle and show them the price difference between name brand chips and store brand, and how not buying name brand items means they can still get the chips they like but without spending all their money.
90% of parents never do this themselves, yet wonder why their kids have no personal finance skills later in life.
4. Start A Savings Account
It doesn’t matter if this is in a bank, a credit union, or your local post office – teach your kids to start saving early.
This not only teaches them how compound interest works in a very real way, but they’re also likely to continue this habit in their adult life.
Most banks have a kids account of some kind, and some of them even offer debit cards.
What better way to teach kids there’s no such thing as free money than showing them how every purchase they make with that plastic card takes money from their account?
5. Make Them Work
Some kids are lucky enough to never have to work to pay the bills, but they\’re the exception rather than the rule, and they rarely have productive or fulfilling lives.
All that glitters is not gold, and all that.
Your kids will have to work for a living though, so why not start them young by agreeing on a set rate for a specific chore, and allowing them to decide how much they want to earn.
You will need to be strict though – tidying their room means really tidying it, and doing the dishes means washing, rinsing and then putting them away.
Ongoing research has proven that kids who are paid to do their chores in this manner are more financially responsible later in life.
Summing It Up
The main lessons to leave your kids with are that money isn’t evil, nor is saving, or owning property, or being financially stable.
We’re always amazed that basic financial management skills aren’t part of the curriculum for every single kid aged 10 – 12 years of age, at the absolute latest.
The current mountain of student loan and credit card debt probably would not exist if the kids of yesteryear had been taught how money really works.