“Put your oxygen mask on first, before you assist others.” We hear this every time we fly, and it always makes me smile. I am a mother, a wife, a daughter, a sister, a friend, a business owner, a Rotarian, a Girls Scout Leader, a Board Member and the CEO of my home. It is hard on most days to just find the oxygen mask.
At the same time, I find “being busy” an inadequate excuse for ignoring your financial health. We are all busy but not tending to your financial well-being can have serious implications for your family. This is why we’re celebrating The Year of Financial Fitness as an ongoing series at The Heavy Purse. Everyone of us has made money mistakes and some of those mistakes may not have occurred had our parents shown us how to manage money.
Money can no longer be a taboo subject if you want to raise Money Smart Kids.
Confess Your Money Sins
Now I’m not suggesting you burden your children with your money woes, but they probably already know that money problems exist. The older the child is the more upfront you can be. Be honest but keep it simple.
“Mom and dad bought more than we could afford with our credit cards, which was our mistake. The good news is we’re fixing it, and we need your help.”
Now outline the changes you’re making to reduct debt, how they can support your efforts and what the end result will be.
Success Tip: Before you talk to them, be sure you have a plan in place to reduce debt. Speak confidently about your plan so your children feel reassured, rather than scared or stressed.
If you are in the enviable position of having no debt—then first, congratulations—and be sure to share with your children the steps and choices you made to be debt-free.
Demonstrate How to Run a Household
I find very few parents do this. We throw them out into the wild (otherwise known as college) and expect them to fend for themselves. Don’t expect your kids to innately know how to pay bills or the dangers of credit card overuse.
With older children, explain how you divvy up your money: bills first, savings for retirement and other goals next and anything leftover is “fun” or discretionary money. If your discretionary income includes money for groceries and gas, be sure to separate that money from the “fun” money. They may be surprised by how little “fun” money there is, which reinforces why you are so careful with any additional purchases you make.
Success Tip: Give your kids hands-on experience by managing a budget for back-to-school or a birthday party. More often than not, they will want more than their budget allows, so now they’ll have to figure out what they want the most, make compromises and look for the best deals.
Let Them Make Mistakes
This is hard to do when our natural instinct is to protect our children, but we need to let them make their own money mistakes too. This is the best time to make them, when the stakes are low. I’d rather my daughters make a $50 mistake now, then make a $5000 mistake when they’re in college because they never learned how to align their money decisions with their goals.
The simple truth is we learn from our mistakes and so do our children. When they find something they want but have no money, they will now understand why we always ask ourselves, “Does this bring me closer or further away from my goals?” They will be smarter next time.
Success Tip: Parents, we need to be strong here. Raising Money Smart Kids is not for the faint-hearted. Take a deep breath and let them make the mistake. When they come crying to you afterwards, don’t gloat or replace the money. Instead share with them a time when you made a similar mistake and what you learned from it. Offer extra opportunities for them to earn money.
In next Monday’s post, I’ll share with you some additional tips on how to have practical money conversations with your children.
The Heavy Purse Store is now open! My new downloadable Money Club Workbooks are now on sale. Each workbook provides five targeted lessons to help you raise Financially Confident Kids. Please check them out in The Heavy Purse Store.