Raising financially responsible children starts with having age-appropriate and open dialogues concerning money and family values at a young age. In addition to talking freely within the family, encouraging and demonstrating good money habits is critical. Children pattern their attitudes toward spending and saving after the grown-ups in their lives. To ensure financial responsibility when they are adults, let them catch you in the act of being responsible, early and often.
Here are some suggestions for how you can teach and reinforce good financial habits.
- When discussing money, as much as possible, talk to them as if they are adults so they really listen and know the importance of this topic. We suggest you start having these discussions as early as age 5 or 6. This is usually around the time children start to understand and become curious about money.
- If you choose to give your children an allowance, be consistent regarding your expectations on how they earn it.
- Require that your children put aside a portion of all money earned or gifted. From an early age, children should know it is important to save a portion of all money coming in.
- As your children save money, have them keep track. Using an app or plain, old notebook to track savings and spending is a good way to learn money management skills.
- Have your children write down a wish list of things that they want to buy with their savings. Then have them prioritize the importance of each. Give them real examples of how you do this as an adult. For example, explain that the plan is to take a family vacation to Greece this summer and then upgrade the family room next year.
- If your family’s wealth comes from a family business, start sharing the story of its founding early on. Tell the stories of its ups and downs, how older family members persevered through difficult times as well as memories of the good times. Establishing a personal connection for children can help plant seeds of pride in being part of something larger than they are. It is especially important if you have hopes that they will one day want to be part of the business.
For money to have meaning and appreciation, there needs to be a sense of where it comes from and an understanding of its best use. Leading by example and being consistent with your children and grandchildren from an early age can help them learn to prioritize, make sound choices and develop the life-long habits that result in successful, adult financial responsibility.