It is the time of year when resolutions are made, and goals are set. We identify things we want to achieve, areas we want to improve, and things we want to stop. Maybe you already know what your New Year’s resolution will be, or maybe you have been thinking about it but haven’t settled on a resolution yet. In whichever position you find yourself, all parents should resolve to teach kids about money.
Parents are responsible for educating their children in all matters of life. Yet a subject parents often forget or avoid is teaching their kids to handle money responsibly. To be fair, some parents have conversations about money, but most are reluctant about teaching good money habits and financial education. Perhaps this is because they don’t think about it, don’t feel like they have adequate knowledge, or they simply are not good at handling money themselves.
Parents need to remember their kids are watching them as they deal with money and will form behaviors and attitudes based upon those observations. We don’t do our children any favors by neglecting to teach them about money. By making this a priority early, parents can help their children avoid major financial mistakes in the future.
The early years are the best time to start sharing lessons about handling money. A study done by David Whitebread and Sue Bingham of the University of Cambridge showed children form money habits by age seven. Some parents might think a child is too young to understand money, but studies reveal that children as young as three can understand basic financial concepts. Don’t worry about starting too early, or even starting too late. The key is to start. Parents should consider teaching their kids about money with four basic stewardship lessons: earn some, give some, spend some, and save some.
Earn some. It is okay to give your children money, but don’t always give them money for everything they want. Consider the following suggestions to help them learn the value of work:
- Assign them chores and pay them for their work. Consider a chore chart and tell them what you will pay them for each chore. As they get older, increase their responsibilities (and their pay).
- Give them educational projects outside of schoolwork
such as a book report or extra reading and pay them for their work.
- Allow them to be entrepreneurial and come up with “new jobs” above their normal chores and, once again, pay them for those. Who says work can’t be fun?
Give some. One of the greatest privileges we have as Christians is giving back to God. Parents not only need to model giving, but they must teach their kids the responsibility of giving. Teaching kids to tithe is important and will help our children give in other areas. Help them set aside money in a jar or envelope each time you pay them. Later, they can give at church or to a missionary. Let them be the ones who give, so they will experience the joy of sharing. Make sure they see you give faithfully, even when finances are tight. They will never forget it.
Spend some. Kids love to spend money like everyone else. Let them. Help them set aside a certain percentage of the money they earn to spend on something they want. Take them to the store and let them use their money to buy the toy. As they get older, teach them about important financial topics like need versus want, the value of things, and how to set up a budget and balance a bank account.
Save some. Children need to understand the importance of saving. As they earn money or receive money as a gift, teach them to put away a portion for savings, in a jar, envelope, or savings account. Teach them to save regularly. Let them save for a particular goal, like a toy or gadget they want. Once they reach the goal, celebrate and take them to the store to purchase it. As they get older, help them set bigger savings goals such as car and college, and begin to teach them about compounding interest and investing.
The goal should be to keep kids from entering adulthood with no idea of how to handle finances wisely. Before we know it, they will be making important financial decisions that will affect the rest of their lives. Let’s not leave those choices to chance. Teaching our children is our responsibility. If we make it our goal to instill good financial wisdom early in their lives, we can save them grief, and set them up for success.
The Board of Retirement is your financial services agency. If we can help you teach your children about money, please contact our office: 877-767-7738.
**Adapted from ONE Magazine