Every blogger will tell you that they didn’t exactly know what to expect when they started, and I was certainly no different. I had my mission and lots of passion around financial literacy, but wasn’t sure if anyone else would care. Well, thankfully you did! Today we’re going back to the beginning because when I find a new blogger to follow, I join them in progress and suspect many of you do the same. We wind up missing out on lots of great information that bears repeating.
One of my biggest a-ha’s as a Certified Financial Planner (CFP®) has been how much our parents influence our relationship with money and how our money habits and beliefs form in our childhood. We often think it happens much later, when our kids are in their teens or are young adults, but by that time, their money habits and beliefs have deep roots. Long before I ever had Lauren and Taylor, I started building a program to teach children how to think about money because I knew teaching kids about money early was key to instilling good money habits and beliefs.
Why Kids Need To Learn about Money Now
Rarely do I find a parent who doesn’t think children should learn about money, but there is a huge debate as to when we should start talking to them. Some believe money is a grown-up concern and want to wait until their children leave home. Others, like me, want to start when their children are young.
The reality is your children are learning now, regardless of whether or not you are actively teaching them about money. They observe how you handle money and will mimic your behaviors and inherit your hang-ups. So I suggest you take control now and help shape their money views, rather than having to play clean-up later.
Money Needs a Purpose
We started talking to Lauren and Taylor about money over dinner, generally about how we were using our family money on a vacation, also known as our family save goal. We kept the conversations light and positive and made it clear that our money had purpose. We carefully thought about the money we had available to us and how we could use it in a way that made us the happiest.
When we were in the store with the girls and they wanted us to buy them something, we reminded them of our vacation. Even though there were times they were disappointed we couldn’t buy them the toy they wanted, they understood why we said “no”. Our money had another purpose, which guided our decisions.
Help Your Children Set Save, Spend and Share Goals
When the girls turned six, we had them set their own annual save, spend and share goals. Because they were already familiar with goal-setting through the family goals, they were eager to set their own. The process couldn’t be simpler and that’s by design. We have a tendency to overcomplicate things, believing it makes it better or more valuable, but when it comes to teaching kids about money, simplicity is the best.
It starts with 3 simple questions:
- What is something worth saving your money for and not spending it right now?
- What is something you want to spend your money on right now?
- Who is someone you love and want to share your money with?
Now you have to help them choose their goals:
- Create a list of items for each category. Give them a number to aim for so they an ample selection, without it being overwhelming. I suggest no more than 10 items.
- Review the list with them. Is there anything on the list that isn’t realistic or you won’t allow, i.e. such as a pet. Explain why and remove the item now. They may be disappointed, but they will be angrier if you let them set the goal, then refuse to let them adopt the dog or cat once they have saved enough money.
- Now have them compare one item against the next and choose which one they want more. After they pick one, have them compare it agains the next item on the list and so on until they find out which item they want the most.
- These are their goals. How do your kids feel about them? They should be really excited and eager to achieve them. If not, ask them why. It may take them a couple of tries before they set goals they truly want. Kids, like adults, sometimes set goals based on what others want, so be patient and work with them to find their true goals. Don’t be afraid to scrap their goals and start the process over. Their goals should make their hearts happy, and they should be highly motivated to achieve them.
Use Your Goals to Make Value-Based Decisions
Now that your children have their goals, those goals become their barometer when they find something else they want, which they will. I taught my girls every time they found something they wanted to ask themselves, “Does this bring me closer or further away from my goals?” and occasionally they decide that this new “want” means more to them than their goals. Sometimes they are wrong (and I know it), but I respect their decision. When they inevitably come crying to me later, we talk through it, so they understand how their emotions may have mislead them. Trust me, they only make this mistake once or twice before they get very good at distinguishing between what they truly want and what they like.
Money Smart Decisions Today Lead to Money Smart Decisions Tomorrow
My father’s money lessons played a significant role in the person I became and the people I’ve been able to help through my financial planning practice. I know my money lessons with the girls will affect who they became as well. I can’t control everything they do or prevent them from making mistakes, but I can do everything within my power to give them the tools to succeed on their own, which includes knowing how to make good decisions with their money.
From the many parents I talk to on a daily basis, their kids have overall embraced the save, spend and share concept. They are setting goals that make their hearts happy and are building a healthy relationship with money. However, I also know that some kids are more reluctant to set goals or honor their goals, and parents aren’t sure what to do when this situation arises. This Wednesday, I’ll share some best practices to help you overcome any resistance you’re facing from your kids.
What did your parents teach you about money growing up? How are you talking to your kids about money?
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