Children and Money
Now is the time for a careful look at what our children need to be taught about money. Every generation of parents dreams, works, and saves so that their children experience greater personal prosperity than they. Until the last few years, the steady advances in purchasing power of the average American has made this dream attainable by most.
Nevertheless, financial instruction continues to be neglected in school systems and in most families. Perhaps for the first time in American history, better money attitudes and management skills will be required curriculum for the next generation.
Loving What You Do
Teenage years are the best time to experiment with different jobs before there is pressure to build a stable resume or to provide for yourself. As a teenager, I tried a variety of occupations that were available to me. I shoveled snow, raked leaves, caddied at a golf course, set pins in a bowling alley, and many others. My career at each occupation lasted only a few weeks, because in each case I left to find work I liked better. Finally, at age fifteen, I found a job in a restaurant, washing dishes, taking out the garbage, and sweeping up. I liked it there, primarily because I felt appreciated. By the time I left, upon graduation from high school, I had advanced to short order cook.
Teach your children that there is joy in work. It does not have to be drudgery. Working only for the money is a losing proposition, no matter how much money you receive.
Give An Allowance
An allowance gives your children an opportunity to develop responsibility about money. Parents should set a definite amount to be paid, at a definite time and define the services expected in return. Set a definite schedule for negotiations about increases. Make it clear which items you will continue to provide for your child. This is really no more than any adult would demand from a responsible employer. Pay their allowance promptly and decline requests for advances or loans. Resist the possible temptation to withhold allowance as punishment for things which are unrelated to the allowance agreement.
Teach your children about money by encouraging them to carry it with them, so they can buy the things they want, instead of having to constantly ask you to buy things during your trips to the store.
Selling and Saving
Children are natural salespeople. It seems that during teenage years, when peer pressure and approval assumes undue importance, this natural sales ability is lost. Encourage your children's efforts to earn their own income. Let them know that all income comes from selling, and that mastering the sales process is the most important skill they can gain to aid their future financial independence.
Setting aside a definite percentage of one's income is the one way to buy something that happens to cost more than the amount of money you receive at one time. Once your children have a basic understanding of mathematics, they can understand this principle. It is not rocket science to figure out that if you continually spend 100% of your income, then you'll never get rich. Understanding is not enough, because practice is required. Show your children that learning to save is the way to be able to afford anything they want. Most banks have substantially increased minimum balance requirements on savings accounts. Although saving is more important than ever, getting started is harder than ever. For this reason, it may be advisable for you to be the custodian of your children's savings account(s) until they accumulate enough to open their own account at the bank.
Another important point about saving is that money is worthless until you spend it. Thus the purpose of saving is not just to accumulate a big bank balance, but rather to have the freedom to buy what you want. Teach them this principle by suggesting they choose an item they want and then encourage them to save for it, and then buy it once the purchase price has been saved.
The Value of Money
The average American watches TV 1,550 hours per year, listens to the radio 1,160 hours per year and sees almost 40,000 advertisements. The sponsors of these ads want us to believe that spending money on what they are offering will solve problems and improve our lives.
Money is only good for buying things. It can never take the place of good health, satisfying work and relationships. Teach your children that there are things more valuable than money. Teach them to value people based on criteria other than their wealth.
Although this may be a source of frustration, it is likely that your children have different values than you; thus they will want to buy different things than you. Since they will be dealing with small amounts, any mistakes they make cannot be very costly. Mistakes are a fine way to learn, so long as they don't cost too much.
It is doubtful that you can rely on the educational system to teach your children effective money making and management skills. Teaching and/or helping your children understand the financial skills they need to handle money may be just as valuable as a fine education.