One of the complaints of many people today is that the world is full of people who feel entitled, particularly Millennials. As parents, we often ask ourselves, in a world that seems to reward entitlement, how do we raise children who have a healthy relationship to money and teach them to be financially responsible? Most people first learn about money from their parents—not by talking about it in any meaningful way, but by observing. But our parents may not have been the best role models for managing and spending money. After all, they probably learned about money by observing their parents. But what if we broke the cycle and actually talked to our kids about money?
We don’t usually include our children in financial discussions because we don’t want them to worry about money, but including them makes them feel more valued and respected in addition to beginning to teach them valuable money lessons. You certainly don’t need to talk to them about mortgage ratesand retirement plans. But you can include them in discussions about the financial ramifications of some of the decisions you make. Kids can understand and handle a lot more than we give them credit for.
At what age can you start teaching your kids about money and choices? I suggest somewhere around age six or seven. This is when they start comparing what they have to what their friends have. At this stage, the habit of asking for everything to “keep up with the Joneses” sets in. Here are five tips that can increase the chances that you will raise financially savvy children who grow into financially independent adults.
1. Don’t give them everything they desire. We all want to be good parents. One way to be good parents is to say no to our children when it’s appropriate. We don’t have to give in to pressure. The fact that we live in a consumer culture is a surprise to no one. Our children are constantly bombarded with product marketing messages, whether online via Facebook and other social media or television programming, which has shifted significantly since we were children. In the 1950s, a half hour television program occupied about 27 minutes of narrative space, leaving three minutes for commercials. Today, half hour programming is about 21.5 minutes, with 8.5 minutes of commercials. We live in an era where brand name logos are the “in” things to wear. This influence comes right into our living rooms.
Resist this influence. Saying “no” at times will set your children on a responsible course for the future, and it will make an extraordinary difference to your pocketbook. Saying “no” does not mean you love your children any less, that you are depriving them, or that you have failed somehow. It means that you are establishing clear boundaries.
2. Set financial boundaries for your children. Kids need and love boundaries. When kids are given everything they ask for during their developmental years, it makes a strong imprint. They grow up believing they should have everything. It creates and reinforces a mindset that says the way to get something is to demand it—or always expect that it will be given to you. It eliminates the cause-and-effect relationship between productive effort and reward. It sets in motion a materialistic pattern that will cost both you and your children tens of thousands of dollars over the years. Make the boundaries clear. Tell them, “I can afford to get you this pair of roller blades. If you want that other more expensive pair, then you’ll have to help make it happen.”
3. Help your children set reachable financial goals. Have your kids create a list of their goals: getting a new soccer ball, taking rock climbing lessons, or traveling to Mexico. Then have them prioritize which of these are most important, and help them develop a savings plan to achieve some of their goals. As parent, you decide the goals to which you want to contribute. Tell them, “Okay, you want an iPhone. You want a guitar. You want every new X-Box game under the stars. You want a clubhouse in the back yard. Here’s how much money is available. You decide which of these things you want most. Or maybe you want to save this money and go to Disneyland next spring. You decide. It’s your choice. But you can’t have it all—unless you want to earn the money to pay for it.” This strategy also de-emphasizes a reliance on credit. This teaches children not to go out and charge whatever they want, but to create attainable goals, and then save the money to buy the things they want.
If you involve your kids in financial decisions, you might even be surprised at what they come up with. A friend’s daughter thought of starting a silver polishing business. Around the holidays she distributes fliers in the neighborhood and always has plenty of customers.
Tune in next week for the final two tips on how to help your children become financially responsible adults!