How To Make Your Kids Good Money Managers

Often, we hear parents complain how incapable their kids are of handling money, or we see parents endlessly shelling out and teaching their kids that money is an endless resource! We see first semester college kids blowing the month’s allowance on a new shirt and calling home for more. Understanding finance or even basic money management is not on the curriculum in high school. So… it is up to you. If you don’t teach them how to manage money, they will learn… but it will be a nasty experience and make nasty family relationships. Here are some steps to take:

1. Make yourself financially literate. Your kids see how you handle your own finances and this strongly influences the way they handle their own finances. Late bills piled in a corner?? No savings plan? No investment strategy… not even a little bit each month?? Credit cards maxed out!!!!! Wow… what do you expect from them? Let them see you not in prayer to money, but managing it sensibly, and you’ve gone the first step.

2. Know your kids. Listen to them. The time to educate them is when they start asking you to buy them things or give them allowances or when they start comparing what they have with other kids in school. Don’t just stick to the old parents’ rant of “Money does not drop from the sky”. This is your opportunity to make them understand how you do a budget and why you need to balance what you earn and what you spend. It’s also a great chance to start talking about planning and prioritizing.

3. Bring your kids to the bank to participate in the transactions you do. They will get to know and understand how and why you save money, how to make your money grow, how to deal with banks, and how your banks can help you with your finances (or snatch money out of your pocket). When they are older, ask your bank contact to explain to them the basics of banking and investment.

4. Start them investing early. You can start them investing by getting them stocks of companies they like and know of. Disney……the company where you work…..a big company in town -- anything that you can talk about. These stocks can take the place of toys they enjoy for an hour at most and then store under the bed. There are companies that offer DRIP, Dividend Reinvestment Plan. Buy them stocks in this and let them watch in the newspaper the growth of these stocks.

5. Start teaching them how to handle money. You may start them buying your groceries. They will start making choices when you give them a budget for the weekly groceries with a list of the “must haves” and then they can pick their snacks. You can also give them their allowance. Start them on a daily allowance and once they get used to handling their own money, move them to a weekly and then a monthly allowance to get practice in budgeting. Oh… and make it fun. Learning is supposed to be fun and you can make these sessions real fun at the dinner table or the store.

6. Encourage your kids (or grandkids) to save money. They can start cutting coupons for groceries and then saving some of their allowance. Tell them to check the products you buy, and if they can find coupons, you will buy the coupons from them as an allowance enhancement. This will get them scouring the newspapers as a bonus!!!

7. Encourage them to start earning money. You can brainstorm with them possible ways of earning money that make sense for their age levels. This is good when they really want to get something that costs more than their allowance. Rather than just giving them the money, they can find ways of earning the money.

8. Encourage them to make decisions on money and its use. Show them the budget for entertainment and let them help decide with you how to spend this. Eventually, move them to decide holidays, then transport and even a new house. It is in these little things that they learn to make decisions. Actually… it will help you make better decisions, too, and it can be a real family builder.

Practice makes perfect. When they learn early and have made decisions on how money is used in their every day lives, they will be in a much better position when they start earning and have to make major decisions on their own. Make money management a part of their lives when they are young and they will make much better decisions as they grow up. Remember… no one else will do it. Their money management skills are your responsibility.