Bringing Up Financially Smart Children

by Krantcents · 23 comments

Post image for Bringing Up Financially Smart Children

Many people have written about what to teach children about money.  This is different because I developed these techniques and used them with my children.  As parents, we want our children to be healthy, educated and happy.  Do you want your children to face another financial crisis?  More realistically, do you want your children to face a personal financial crisis?  Of course not!

How to avoid these issues?  Everyone needs to learn financial skills. What else would help?  Financial skills are just facts, if you do not know how to use them.  You can teach your children a bunch of facts, but there is so much more to it.  This is a good time to start to discuss wants and needs.  If you got everything you want, you will be in debt.  Start as early as you can.  Teach your children to make choices. As an adult, you understand you cannot have everything so you make choices.  Start with clothes, toys, food, and play.  Ask your children to makes choices.  The more decisions they make in a safe moderated environment, the more experience they accumulate.  As adults, doesn’t your decision making improve over time?

Now your children are making choices!  You make the selection for their choices which guides them in their choices.  Is that enough?  The next step is for your children to make the selection and you can help them make it.  This is an age appropriate decision.  My wife would help dress the kids in the morning for preschool.  She would help them make a choice the night before.  Getting ready for school became easier and it teaches them about making choices.  I would add to their decision making process by questioning why they would make certain choices or decisions.  Asking questions became a game in our home.  Don’t we want our children to question and become independent thinkers?

By the time your children become adults, they have made thousands of decisions.  As parents, we guide them in their decisions by offering them choices.  At the same time, children see what their parents do too.  Your choices have a large influence on your children directly and indirectly.  If you go to the mall every weekend, your children will think that is normal.  If you are in debt, your children will think that is normal too.  Parents need to be role models for more than integrity, values, and morals.  You need to make good financial decisions too.

When children can take on chores, they should receive an allowance.  This is an important stage for children because they will have their own money and will make their own decisions.  As parents, we are helping them make good decisions directly by what choices are offered and indirectly by what choices you make.  If they are making decisions for years before they start receiving an allowance, they are more likely to spend their money wisely.  This is an opportunity to teach your children about savings.  You can discuss savings goals, saving for a particular item and most importantly savings in general.  In my home, my children had to save fifty percent.

As your children start to have savings, this is a good opportunity to teach them about investing. You can expose them to what you are doing, they can invest in familiar companies and learn how investing works.  My children were involved early in the process, they read information, we discussed it, and they saw what I did and invested their money to make it grow to buy cars at sixteen.  This was a good learning exercise, but it was a lesson in life.  I wanted them to make financial decisions in a safe, controlled environment which I could monitor.

As my children (at 17 yrs. old) went off to college, I cosigned a checking account and gave them my credit card in their name.  What does this mean?  Because they were not eighteen, I had to take responsibility for their checking account and I put them on my credit card.  Some may think I was crazy; however I felt they were prepared for this responsibility!  My children handled their responsibility well.  There were no over drafts or misuse of my credit card!  They had part time jobs and used summer employment to fund their spending money.  What do you think they learned from this experience?  Aside from the obvious of good financial skills, they learned how to stand on their own with a little monitoring from their parents.

My children are successful adults.  The only debt they have is a mortgage and my son has law school debt, but he is a new attorney.  What else influenced their success?  My children participated in sports, scouting, plays, school trips and summer reading programs.   Reading was an important in their lives and they were encouraged to read everything.  Dinner was discussion time at our house.  It was important for everyone to participate and everyone was valued.  They would join my wife and me at work on Saturdays or my business during the summer.  They worked for their lunch at my restaurant and saw how a business operates too.  They saw how we and others work which certainly influenced them.  Most importantly, we still maintain a good relationship and discuss things several times a week.  Do you do these things with your children?

Photo by:  woodleywonderworks

Please make sure to subscribe to our RSS feed to get the latest updates!

{ 22 comments }

Money Beagle February 28, 2011 at 1:05 pm

Our son is turning two this year (and we have another on the way). My wife and I both agree that teaching him important financial habits as he’s able to learn will be an important part of his upbringing. Quite honestly, though, I think teaching by example is the best thing you can do. At least it worked for me as my parents and grandparents exhibited very good behavior and I was able to take a lot from that.

Money Beagle February 28, 2011 at 1:05 pm

Our son is turning two this year (and we have another on the way). My wife and I both agree that teaching him important financial habits as he’s able to learn will be an important part of his upbringing. Quite honestly, though, I think teaching by example is the best thing you can do. At least it worked for me as my parents and grandparents exhibited very good behavior and I was able to take a lot from that.

krantcents February 28, 2011 at 3:58 pm

You are right! 50% is teaching them and 50% is you modeling the right behavior. Another aspect is what you share with them in experience. For me, it was work, and play. Taking them to the office or spending time playing with your children has a huge impact.

krantcents February 28, 2011 at 3:58 pm

You are right! 50% is teaching them and 50% is you modeling the right behavior. Another aspect is what you share with them in experience. For me, it was work, and play. Taking them to the office or spending time playing with your children has a huge impact.

Little House February 28, 2011 at 9:19 pm

Being immersed in the credential program right now, I just read in a text book last night that stated that the difference between the high achieving students and the lower-achieving students is the amount of adult time they get. It sounds like your children had lots of time with adults for discussions, modeling correct behavior, and having structured hobbies outside of school (another indicator of high achieving students). But what does high achieving students have to do with good personal finance skills? Higher achievers have better critical thinking skills and make better choices. Students need lots of time to discuss topics and make choices.

krantcents February 28, 2011 at 9:46 pm

Although my children were high achieving students, this would work with average children as well. Parents influence their children with their words and actions. In fact, my children attribute their success to what they observed more than words. That is why modeling the right behavior is so important. Spending positive time with your children gives you an opening to influence them. My children developed a positive view of reading because we read to them every evening and they saw my wife and I read. When my children would read various things, we would discuss it all this allowed more of an influence on them.

Money Reasons February 28, 2011 at 11:45 pm

Sounds like you did a wonderful job! All of what you mentioned above sounds great!

I was raised to be frugal and an investor, I will teach my kids that same that I have learned! We even play that Cashflow for Kids game.

krantcents March 1, 2011 at 12:21 am

Thank you. Do everything and anything! Children are influenced by what you say and what you do. The most important part is spending a lot of time with them so you can influence them. Just a funny story, my son was reading The Wall Street Journal at 10 years old because he was interested and saw me reading it.

Kris @ Everyday Tips March 1, 2011 at 3:16 am

Well it looks like you taught your kids about a lot more than just finances. Great job!

krantcents March 2, 2011 at 4:25 pm

As a parent, we teach our kids and they learn by watching what we do! My kids learned more from they saw my wife and I do than what we actually taught them.

Mark February 28, 2011 at 9:42 pm

Good list. I am a big advocate of teaching kids financial literacy.

consolidate debt March 1, 2011 at 1:22 pm

Children learn spending before saving. It’s just natural because they constantly witness you paying for purchases. By involving them in the bill paying process you will begin to teach them allocation and the importance of needs verses wants. Allow your child to use a portion of their allowance toward something they want. The other half should be put in a savings account. Let your child keep track with their own bank book.

krantcents March 1, 2011 at 3:28 pm

Good ideas! You are right children learn more from what they see than what you tell them.

krantcents March 1, 2011 at 3:27 pm

Thanks, it is the perfect opportunity.

Aspiring Millionaire March 1, 2011 at 7:59 pm

Great post. I think many people do not teach their kids about money. I am so grateful my dad taught us a lot and my siblings and I are pretty responsible with money. My children are only 2 and 3, but they are starting to learn little bits and I hope to teach them well.More parents should read your post!

krantcents March 1, 2011 at 8:27 pm

Feel free to tell other people about it! Start influencing your kids by reading to them, asking them to make choices and don’t forget to model the right behavior.

Aloysa March 1, 2011 at 7:39 pm

Great post. We don’t have children but I do agree with everything you said. Growing up I didn’t have a lot of personal finance education and it did show later. All the mistakes that could have been avoided…

krantcents March 2, 2011 at 4:05 pm

I was always fascinated by money, so I pursued this on my own. BTW, mistakes are important if you learn from them.

Buck Inspire March 4, 2011 at 6:08 pm

Don’t have any kids, but those are some excellent tips. :) Now wonder your children are successful adults, you and your wife are great teachers. Looks like you are teaching your readers a thing or two as well. Looking back, is there anything you could have done better with your kids?

krantcents March 5, 2011 at 3:41 pm

Little things that have no real consequence. Since we have a good relationship, I can continually influence them and I do.

DIY Investor March 6, 2011 at 10:19 pm

Raising kids to be responsible financially astute adults is quite an accomplishment in today’s age. Many of my students in community college don’t know what a mortgage is, how a 401k works or even the basics of compound interest, I feel like they are ripe to be taken advantage of by the credit card companies as well as Wall Street. Financial literacy is an important topic and you’ve made a nice contribution.

krantcents March 6, 2011 at 11:44 pm

Thank you! I would love to start a movement for a financial literacy requirement for all college graduates and eventually all high school graduates.. Nothing heavy handed, just the basics so when people sign disclosure agreements, they are informed.

{ 1 trackback }

Previous post:

Next post: