December 12, 2023

Money Lessons Every Child Should Learn

From a very young age, children pay close attention to how money is treated in their home. Many parents are missing the opportunity to use the observations as teaching opportunities. Parents prefer to keep quiet when there are struggles or disagreements about money, especially with things such as debt, paying for college, monthly budgeting and family income. They keep quiet to protect their kids from their mistakes. This can’t be further from the truth, however. My personal experience has taught me that parents who make significant money mistakes and involve their kids in the lessons learned from these mistakes, can see a much greater impact on seeing their kids make smart choices as they enter adulthood.
Children know when their parents lack perfection. Lecturing them on how to make perfect choices about money will only drive them to more compulsive, destructive money decisions. The fear I initially see from parents in speaking the truth, is that their child will be their little copy-cat, making the same mistakes they do. My experience has been quite the opposite. I have found that our kids are making much wiser choices with their money because of our honesty about our own mistakes, and the lessons we learned from those mistakes.
I recommend parents take a good honest look in the mirror; write down your money mistakes, past and present. Share these with your kids. It’s an exercise with dual benefits. First, it forces you to sit and become honest with yourself about where you may have mismanaged your finances. Awareness is the first step toward choosing a new path. Second, it allows you to become vulnerable and authentic in your relationship with your child, deepening their respect for you, and showing that a true leader owns their mistakes and works hard at fixing them. That’s a priceless life lesson that seems to be missing quite a bit in the “school of parenting”.
Here a few habits to begin teaching your children as you become aware of your lack of financial perfection and strive to become a better teacher for your kids.
1. Own your mistakes and devote yourself to fixing them
First things first; forgive yourself for not being perfect with money. If the best time to become a great financial steward of your money was 20 years ago, then the next best time is right now. Become aware of your mistakes, own them by writing them down, and be willing to learn how to fix your mistakes. If you don’t know the best habits for using credit cards or how to make a household budget, seek professional help and learn with your child.
2. Create a family spending plan
Most families make a good living and have substantial income, yet at the end of the month they often tell us they don’t know where all the money went. Spending everything you make, or even worse, spending more than your make is certain path toward insurmountable debt and poor lessons for the kids. Consider setting a weekly family budget meeting. Sunday nights after family dinner is a great time for the whole family to sit down and review the family bills and the upcoming family expenses for the next week. This way the kids can see exactly what it costs on a weekly basis to manage the household finances. Be willing to admit when you make mistakes with your weekly budgeting and overspend on non-necessary items. Be open in discussing what you could do better as a family.
3. Save; no matter what
Not everyone believes they can afford to save. 10-15% of your take home pay should go into savings before any bills get paid, even if this is as little as $10 per pay check. It is critical to teach your kids the importance of investing in themselves and paying themselves before they pay anyone else. Ideally, your savings should include an emergency cash fund as well as a fund for your retirement, like a 401k or an IRA.
4. Protect your credit
Most everyone I know has debt; mortgage debt, car debt, student debt, credit card debt. Debt has become part of the culture. You as a parent must step up and show your children how important it is to properly manage and protect their credit. Even if you struggle to pay your outstanding debt, paying something is better than ignoring it. If you are at a point where you have gotten a little over your skis with debt, involve your children in a discussion about how you got to this point and about handling your responsibilities going forward. Then call those you owe and make manageable payment arrangements with a timetable of when your debt will be paid off. It’s an incredible lesson to teach your kids; that sometimes we just have to deal with cleaning up financial mistakes, no matter how hard it is.
5. Agree to disagree
Disagreements about money can be some of the most damaging dynamics in a family environment. I meet families all the time who have different priorities when it comes to money. In 2013, Fidelity conducted a study about couples being on the same page about money. Their study concluded that 8 out of 10 couples believed they were in synch with money, when in fact they had very different priorities and beliefs when it came to money and how it should be used.
It’s no wonder why so many families battle over money issues, but it doesn’t have to be that way. We encourage families to sit and have discussions about differing views on money. Where do we agree about money? Where do we struggle to agree? Can we truly listen to one another’s beliefs and work to support one another despite our differences?
This is not an easy exercise and families who have a hard time tackling this should seek professional help. Family fights about money that are not resolved are some of the most harmful interactions that can happen, especially in the presence of the kids.
As parents, there’s nothing we want more than for our children to do better than we have in life. Helping them learn from our mistakes is a big part of the process.

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