I’m thrilled to share this guest post today from fellow blogger Sarah Brumley! Sarah is one of my blogging sisters – I swear, half of what she writes makes me think, “I can hear myself saying that to my kids!” (The other half, I wish I had already thought of saying to my kids!) While I haven’t read a post of hers that I DON’T like, I’m especially fond of her organizational tips for the home, and her wise words on personal and family finance. Thus I could think of no one better to write a post on hacks for teaching finance lessons to your children. I hope you love her common-sense, down-to-earth tips as much as I do!
Three Finance Lessons All Children Should Learn
We didn’t talk a lot about money growing up. I didn’t receive an allowance the way many kids did, but rather, my parents took care of all of the necessities, and provided a little spending money when I needed it. In high school, I took on a waitressing job and I always seemed to have enough money to take care of any needs and wants I had.
When I got to my twenties, though, I did what a lot of young adults do: I got a credit card, took on a lot of student loan debt, and didn’t save a penny. It was eye opening when I finally realized what I needed to do to get my finances in order.
I’m well aware that we cannot control how our children will choose to deal with their finances in the future. What they learn now, though, will lay a foundation that they can return to in the future, if and when they decide to manage their finances responsibly. Of course, there are so many different facets of finance that can be learned, so my suggestion is to start with the following.
1. To make money, you must work for it.
I’m sure you don’t head out the door every day to go to a job that requires nothing of you. In fact, I bet there are many times you return home stressed because of all the things that still need to be done at your place of employment. While kids don’t necessarily need to understand that level of stress, they should be aware that money doesn’t grow on trees and doesn’t come as a free handout.
Helping your children to understand this concept can be difficult when birthday cards include enough cash to keep them in toys until Christmas, but it can be taught in a couple of ways.
Everyone contributes around the home
There’s a lot of discussion regarding the pros and cons of giving your child an allowance tied to doing household chores. While I recognize it doesn’t work for many children, I want mine to understand that everyone contributes to maintain our home. Just because they live here does not mean that they will get a free ride.
Is household work fun?
No, it’s not.
In fact, I’ve had this discussion with my own daughters just recently, and we came to the conclusion that if everyone is going to live in the home, then everyone gets to contribute. Dad goes to work to make money to pay for the home, so he doesn’t spend as much time maintaining it by doing household chores. Mom works from home so, while she is making money to pay for groceries and such, she also prioritizes making sure that the house stays organized and clean. Kids who are not contributing financially but are still reaping the rewards of a warm bed, clean sheets, and home cooked meals, should participate by completing household tasks.
If you have older kids – they might start to groan about doing chores, and that’s okay. I let my family know if they wanted to trade chores for paying rent to live in our home, I’d be fine with that. They quickly realized the problem: in order to pay rent, they’d have to go get a job outside of the house, and possibly work harder than they would just to do their chore here.
Teach your children to do their tasks without groaning and complaining, and to get those tasks done well, and that will be something that will stick with them as they move into life in “the real world”.
Assign rotating chores or “tasks” around the home for each child to participate in. While you can tie it to privileges, I highly recommend having some sort of monetary arrangement so that your child begins to understand that money only comes when you work for it.
When your child needs more money than what they have in their pocket, allow him or her to work for additional money doing tasks above and beyond their normally assigned chores. This could be mowing the lawn, cleaning windows, mopping floors, or whatever else needs to get done that day.
2. Prioritize spending
Ever handed a ten-year-old five dollars to put in their purse and then waited a week to go anywhere she might have a chance to spend it? I’m guessing you had a squirmy child, constantly asking when the next trip to the grocery store was going to happen, whether you needed to go to Walmart any time soon, or were you heading to the mall.
I tried it with my daughter this past week and that money has seriously been burning a hole in her pocket. The thing is – she really doesn’t have anything she wants or needs, but she knows that she has money to spend and can’t wait to do so.
Helping our children learn to prioritize their spending is important. Even as adults, we know that an unexpected amount of money gracing our wallets or bank accounts can lead to the temptation of spending it, even on unnecessary things.
So how do we help our children learn how to save their money for the things that really matter?
Let them spend it
We allow them to spend their money on the things they want, with a careful reminder that they might prefer to save it for something bigger. In our case, my girls will spend all of their money on gum, just because we make it to the grocery store more often than the toy store. Then, when they do get the opportunity to hit up the toy store, they have no money left.
It’s a hard lesson for a child to learn, but it’s so important that they recognize that, by spending their money on something they didn’t really need, they will miss out on those things that they really want down the line.
Don’t bail them out
Whatever you do, don’t bail your child out when their eyes start to well up in the toy store. Instead, calmly remind them about the money they had and what they spent it on. This might be a lesson you have to learn with your child, but if you’ve given your child a warning about spending all their money on something they didn’t really need, then you cannot bail them out when they realize they don’t have enough money for that thing they really wanted.
When you choose to give them that money, they begin to expect that money will just show up when they need it and won’t see the value in saving or earning money in the future.
3. Debt might be easy, but it’s not fun
Of course, if you want to allow your child to purchase that item they don’t have enough money for, then it’s a great time to teach them about debt. Talk to them about credit and what that looks like. They can have credit with you for that item, but then every bit of money they receive needs to go to you (making them uncomfortable) until they have paid down that debt.
Hopefully, it won’t be a fun thing for your child to be in debt and might help them avoid it in the future. In fact, you may even be able to talk to them about how you use debt yourself (if you do). Show they that you might swipe that credit card in the store, but then educate them on the process that happens after: you receive a bill, you have to pay it back, and it comes with interest.
Swiping a credit card looks like fun to a child if they don’t understand how debt works. If you don’t believe so, ask any college student that’s just maxed out their first card.
It starts early
Whatever method you use to address finances with your child, make sure you start early. You (and they) will be happy you did!
Are you teaching your children about finances? Leave a comment below and let me know how (and what!) you are teaching them!
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ABOUT THE AUTHOR: Sarah Brumley is a writer and educator with a desire to provide everyday families with practical tools and strategies for simplifying their family lives. Her website, Lemon Blessings, is a family-oriented blog with a focus on budgeting, goal setting, saving, debt management, household, and family life. When she’s not writing, Sarah enjoys spending time with her husband, pre-teen daughters, and three cats. Sarah can always be found on Twitter or you can track her down on her blog at lemonblessings.com.