What I Am Teaching My Kids About Money

October 13, 2014

As you may know from following this blog, I have just completed my dissertation and other requirements to earn my Ph.D in Personal Financial Planning from Kansas State University so we now have two proud Wildcat alums on staff here. (Doug Spencer is the other. He personifies loyalty to one’s alma mater and has plenty of purple shirts in his wardrobe to prove it.)

As my final days as a student have passed, it struck me that my kids don’t actually remember a time when I wasn’t in school. The great thing about this is that they have been able to watch me model what it means to be a student. So now that it’s all over but the paperwork, I just have to wonder: how can I be an effective role model for my kids and their education?

We often forget that parents are also role models when it comes to financial habits. Most young adults say that what they know about handling money is what they learned at home. Even if you aren’t a “Money Doc,” you can still teach your children some very valuable lessons about finances while working to improve your own knowledge. Here are a few ideas to get started:

1) Give your kids an allowance instead of buying things for them. Obviously this changes as the kids get older but allowing them to make choices – and mistakes – with their money will help them learn how to prioritize.

2) Open a savings account for them and have them contribute each “pay day.” You can even create incentives to save by offering to match a portion of their savings.

3) Allow kids to purchase their needs such as clothes – as long as they are appropriate for your values – or the groceries for their school lunches with a pre-determined budget. This helps them learn how to stretch a dollar.

4) Include the family in conversations about family priorities such as what do you want to do for a vacation this year. Explain that trip may be too expensive or find ways that they can help make that possible by making extra money or cutting back other expenses.

5) If you use credit or debit cards to shop, explain how that money comes straight of the bank account like cash or that credit cards have to be paid in full each month to avoid high interest rates and how you manage those cards.

6) Talk with your teenagers about how much of your paycheck you actually take home and how much goes for retirement, insurance and other benefits. Obviously, you want this to be age appropriate as my kindergartener would probably quickly lose interest unless I broke things down into things that he understands like Lego’s and Star Wars figures. This can also be a great time to explain the reality of what student loan payments may look like if they take on too much student loan debt.

The Consumer Financial Protection Bureau has a new site designed just for this purpose so take advantage of this free resource and enjoy your role as a financial teacher.

http://www.consumerfinance.gov/parents/

http://www.consumerfinance.gov/paying-for-college/compare-financial-aid-and-college-cost/

As a parent and a financial educator, the main idea is to do more than just tell your kids how to manage money. At Financial Finesse, we embrace a “show-don’t-tell” approach to learning and behavioral change. Children are good observers and will learn the most from our actual financial behaviors. Even if you’ve made some bad moves in the past, it’s never too late to move those prior financial decisions into the category of “learning opportunities.” Perhaps the most important lesson that I want my kids to learn about managing their money as they grow older is that while they don’t have to be perfect, they just need to be prepared for whatever financial blessings or hardships may come their way.