Bringing Up Financially Smart Children

by Krantcents · 23 comments

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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

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