How Experts Say to Teach Children About Money

How do you think Polonius would have survived, if he had been a modern American? He was the character in Hamlet who said, "neither a borrower, nor a lender be." He might not have survived too well, considering the average American owes $8,000 in credit card debt; in the past decade personal bankruptcies have more than doubled; and almost half--43%-- of American families spend more money than they earn, year after year. As of October 2003, Americans owed almost $2 trillion in debt. If you want something better than that for your children experts have a lot of advice to offer about how to teach your children about finances. If you are going to teach them, you will need to follow the advice you give to them as a parent.

According to Crown Financial Ministries, two of the most important lessons you can teach children about finances are to exercise self control and live on a budget. If you are not disciplined in your finances, neither will your children be, even if you tell them they should be. No matter how much you are able to earn, even if it is a lot, you need to demonstrate moderation in all things. Living on a budget will help you do that. If you are on a budget yourself, children will learn the importance of not spending more than they have and making sure they have enough money to pay every bill, provide for every need, such as food and clothing, and saving for an emergency. If one saves for any emergency, he will not have credit card debt in paying for the unexpected.

If you give an allowance to your children, you should give them an allowance big enough they look forward to it. It should not be big enough, however, that they can use it to provide for all their wants and needs. Just like you receive raises at work, your children should receive occasional raises in their allowances. An allowance is money with no strings attached, not money given for jobs performed.

You also should provide jobs for your children for which you will pay. Such jobs can include cleaning out the garage, mowing the lawn, washing windows, and washing the cars. You should pay fairly, but do not pay more than you can afford, according to the family budget. You should only pay for jobs done well and done completely. Do not pay for partial jobs. You should not pay for things done poorly, although you should realize your children are human and will never do things perfectly.

You should encourage your children to share with others. While this can include friends, it also can include giving a tithe at church, or even giving to missions or charities.

You should encourage your children to save to buy the things they want. If they see that you will not charge things just so they can be happy, they will be less likely to accumulate debt when they are adults. That doesn't mean you can never buy something they will enjoy just because you love them. It does mean such things should not be an every day occurrence.

You can teach children about tithing as young as six. You can teach them about simple budgets as young as eight. A simple budget means using a portion of one's money for spending, another portion for saving, and another portion for giving, such as a tithe. As young as six or seven, they can be taught to save 50 cents of every dollar, spend 40 cents, and save 10 cents. To help teach these things, give amounts that can be divided equally, like four dollars, instead of five.

Children should use their spending money for things they want. You should not buy such things for them. They need to learn when the spending money is gone, there is no more to spend. They cannot use their savings or giving money for fun things.

Children should learn that the money they save is for something that is attainable. On the other hand, it should be for things that take awhile to be able to have. Examples could be to go to a movie, to a ball game, for extra spending money when going with the family to an amusement park, or to buy a special gift.

By the time children are nine, they should have a written budget. An example of how it could be prepared is 10% for giving, 25% for saving for short term wants (three to six weeks), 25% for saving for long term wants (three to six months), and 40% for spending.

When children become teenagers, they should have a checking account by the time they are 16. They should also include taxes in their budgets, 5%, and expenses, 10%, besides the categories they have already been budgeting for. By budgeting for expenses, they will be prepared as an adult to budget for utilities and other monthly bills.

Experts say these goals can be adjusted according to personality types.

Experts also say before you begin to teach your children about finances you should discuss your goals with your spouse. You should also try to remember what you wanted to do with money when you were a child, to understand your own children more. Ask your children about their own thoughts about money, so they will know you value their opinions.

You should teach your children that you had to work hard for your money. That is better than just saying, "money doesn't grow on trees." They will then learn the importance of working themselves to earn their own money.

Each time your child says he wants something, especially something he sees in a store, use that as a chance to teach about saving.

It really isn't hard to teach your children about money, if you are adequately prepared ahead of time.

Citations:

The Basics How does your debt compare? No author listed, Moneycentral.msn.com

Children and Finances Part 1 by Crown Financial Ministries, Crown.org
Children and FinancesPart 2 by Crown Financial Ministries, Crown.org

Teach Your Children the Value of Money, no author listed, Finance.yahoo.com