Various surveys have shown that parents would like their children to know more about personal finance and money management, and they feel that schools should be doing most of the teaching. Of course, as most of us know, schools are already overwhelmed with teaching traditional courses such as math and reading. Some financial education is taught by schools but it is limited. As a result, the majority of financial learning should begin at home with parents, grandparents, guardians, and other caring adults.

Adults are in Charge

As an adult, you need to remember that you’re in charge. Adults need to have expectations when it comes to money management by kids and expect them to be met. And adults should not feel guilty if financial decisions or lessons make kids unhappy. For example, if a child doesn’t have enough money to purchase a toy, do not help out and purchase the item for them. Kids need limits and boundaries in all areas of their life – money is no different. You might be helping the child short-term by getting the item they want but you are certainly selling him/her short long-term. If you don’t purchase the item for the child, then explain why the child can’t have the item rather than just saying no. Be direct but kind and respectful with financial guidance and make learning about money consistent. Children will beg and nag as often as they can to get something they want. They are counting on adults to give in to their demands. Setting limits early and often when kids are young can also head off bigger issues down the road when these same children have grown up.

Numerous Learning Opportunities

Teaching kids about personal finance and money management doesn’t have to be complicated or fancy. Small learning opportunities are all around us if we can see them as the opportunity arises. For example, taking the time to show a child how to pay for a few items with cash (and count it out for the cashier in front of the child) as opposed to using a credit card for payment. Eventually, for small items, you can help count out the money and give it to the child to pay. Remember that kids are absorbing information even when you don’t realize it. So make sure you are following your own financial guidance.

Adults Learn Better Money Management Habits

All too often, good money management programs are delayed because parents are not sure when to start teaching about money. Experts say that if kids are starting to ask for things to be purchased for them, then they are old enough to start learning about money. Some adults procrastinate because of their own limited understanding of financial matters. But, with some assistance, an opportunity to teach children about personal finance and money management can also be an opportunity for adults to learn as well. This is really a win/win situation.

Withholding Private and Confidential Financial Information

Sometimes adults feel that financial information is private and confidential and so they avoid the topic at all costs. But there is a lot of money management that can be taught without revealing private and confidential information. If children do ask and parents would rather not share this personal information, they can be candid and direct and explain why. Perhaps, children can learn more about the family’s financial situation as they get older, more mature, and more responsible.

Don’t Want Kids to be Money Obsessed

Other parents don’t want to make their children money obsessed so they avoid the subject all together. As long as this concern is raised directly with kids, and it is made clear that people are the most important consideration not money, then kids usually get the message. Avoiding the topic just makes them ill prepared to go out into the world as financially literate adults.

Difficult Financial Family Situation is Okay

If your final situation is precarious, then just be honest and direct with your children. Kids are surprisingly adaptable to changes in economic situations. Kids are willing to accept the truth if the advice is given with respect and honesty. The lesson that family financial situations can drastically change  can actually be a great lesson for kids to learn. After all, it might happen to them when they grow up.

Kids Can’t Get Money Whenever It’s Requested

The goal should be to raise productive, happy, healthy, responsible and successful citizens of the world. How to manage personal finances and money management is a key factor in achieving these goals. Sometimes adults think they are helping kids by giving them money whenever they ask for it. If we give kids money freely without asking for anything in return, we’re failing in our role as teachers. Kids will never learn to live within their means if adults keep expanding the limits. This is true for parents as well as other family members (e.g., grandma and grandpa) that aren’t on board with a money management program. How does a child learn to manage money if there are no restrictions and ultimately no challenge? Fulfilling a child’s every desire isn’t doing the child any favors. In fact, the lesson they are being taught is how to be financially dependent on other people for the rest of their lives. Bottom line: too much easy money can be bad news for kids and their future. Do you really want to do that to the children in your life?

References

1. Clark Smart Parents, Clark Smart Kids (Howard, 2005)

2. Kids and Money (Searls, 1996)

3. Money for Teens (Shelly, 2001)

4. Money Doesn’t Grow on Trees (Godfrey, 2006)

5. Raising Money Smart Kids (Bodnar, 2005)