In many of my posts, I have stressed out the importance of starting your wealth journey young (Why It’s Great to Be Young and How 10 Cents Can Turn Into $13,000 in One Game of Golf). However, that’s often easier said than done! Being not SO old myself, I do remember my childhood days, and just HOW much I wanted things, and more often than not, my parents would have to concede and I’ll get what I want, and their wallets will be that much worse off. Jason from Frugal Dad wrote an excellent posts on some ways you can teach your kids to be money savvy, right from early on. Here are 5 of his tips.
1. Teach Them To Value Money – A couple years ago, my son really wanted a Nintendo DS. The sticker price of $150 was shocking to me. But I told him, “Sure you can have one, you earn the money and save up, and I will personally take you to the store to buy one.” I then planted the seed of recycling and turning in our cans and bottles for money. He jumped all over it. Not only did he save and sort our recyclables, he also hit up all his grandparents for theirs.
After he had a sizable haul, we would take them down to the recycle station and he would unload them and even sign the receipt. He finally saved up enough money for the Nintendo DS. It was a great experience for him and taught him that money does not just grow on trees. It has to be earned by hard work and dedication.
2. Give An Allowance – My kids are just now getting to the age where they can start earning an allowance by doing chores around the house. This is also a great way to teach the value of an earned dollar.
The psychology of money is amazing to me. I have noticed in my kids that when they earn money they are less likely to waste it on something trivial. They will want to save it in their dresser drawer for something special that equals the value they have put on the money. Whereas if I give them a couple dollars to spend at the store, they will buy some candy or toy that usually ends up on the floor of the minivan.
3. Savings Account – When each of our kids were born, my wife and I opened a savings account for them. We add birthday money and Christmas money from the grandparent to their accounts every year. When the statements come, I make a point of talking to them individually about how much money they have and how much interest they have earned. They get very excited with the news that they have earned $1.75 last month by doing nothing at all.
The idea of saving money for things like college, or their first car, has to be planted early and often. My hope is that it will help to remove the sense of entitlement that is so prevalent with kids today.
Editor’s Note: ING Direct, one of my favorite online banks, recently added akids savings account offering that may be of interest to parents looking for a safe place to park accumulated allowance money.
4. In Order To Receive, You Must Give – It happened the other day in the car and it gave me goose bumps. My 6 year old daughter was whining about why she could not have some toy. Tired of her whining and without thought or hesitation I quoted Rich Dad, Poor Dad, “If you want something, you first need to give.” Silence. I let that thought just hang in the air for at least 15 seconds. I could see in her eyes through the rear view mirror that her mind was working overtime trying to understand the concept.
This led to a great conversation about giving, whether it be toys you don’t play with to a charity, or time spent teaching your sister how to ride a bike, and how these things will bring you much more in return than you could ever imagine. I then explained that by being generous, people are going to want to be generous to you. By taking time to help someone else, others are going to want to take the time to help you when you are in need.
5. Personal Responsibility – They are responsible for the money they receive from allowance and otherwise. When it’s gone, it’s gone. So I tell them that it’s their responsibly to save it wisely or spend it wisely if that is what they choose to do. And definitely don’t leave it laying around the house or it may end up back in my wallet!
The idea of personal responsibility carries over into other aspects, like “You say you want dessert tonight? OK, well, let’s look around the house and make sure all of your responsibilities are taken care of. Then we can discuss dessert.” You do this enough times and you stay consistent, they will take care of their personal responsibilities long before they come to you asking for something.
What do you guys think? Do you have any tips on how you help your kids learn and appreciate money?
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