For those of us with kids, we hope to pass down certain traits—good looks, agility, perfect vision, smarts, business savvy. But what of our money management skills? Financial finesse rarely makes it onto our list of personal strengths, yet it’s a crucial life skill everyone needs to acquire. A Charles Schwab 2010 Families and Money survey found that “not saving early enough for retirement (43%), not saving money for emergencies (42%) and carrying credit card debt from month to month (30%) [were] cited as the top three financial mistakes [parents] fear their kids will repeat.” Don’t let your kids make your same mistakes or fall into that ever-growing percentage of 18-24 year-olds who file for bankruptcy.
Here are 4 simple things to do differently (or start doing) as a parent, to ensure your kids gain financial awareness from an early age and build responsible habits.
Monkey See, Monkey Do
Show and Tell
Too often, television, movies, music, and online media present youth with a skewed perspective on money. A Kaiser Family Foundation study in January 2010, discovered that children between the ages of 8-18 spend an average of 7 ½ hours a day involved in some form of media. That’s a LOT of time spent being “plugged in,” and even more troubling considering the, um, lack of taste or quality presented in most teenage entertainment. Example: the first time I ever watched “My Super Sweet 16” on MTV, it made me throw up…OK, that’s a lie. But I really wanted to throw up…all over the girl’s new $67,000 Lexus (It’s ok. She didn’t want it anyway–wrong color). It wasn’t the outlandish nature of the gifts that worried me, so much as the huge reality gap t.v. shows like this create for very impressionable, teenage viewers. With no real financial literacy under their belt, and too many ideas on how to spend money, it’s no wonder teens experience a disconnect from real life and what it takes to secure a decent cash-flow.
Enter the parents. What is our job? To lovingly prepare our children for real life and teach them proper life skills. That means supplying them with opportunities to experience hard work. Turn off the TV and show them how it’s done. Let them help you make dinner, rake the leaves, or work on the car. The payoff will be inevitable. The Schwab study states that “children who regularly did more chores growing up are reported by their parents as [being] more financially responsible as young adults.” Their ability to work and achieve goals will eventually translate into monetary goals. So the next time your son whines about taking out the trash, just tell him you’re being a good parent…and “that Jay-Z fellow” had to take the trash out, too, when he was a kid.
Necessities like food and shelter suck up a hefty chunk of monthly income. “Living ain’t cheap” (as my mother says) and kids need to know that. If not, they could be ill-prepared for life on their own. This often leads to mom and dad handing out cash for much longer than anticipated. The Schwab study found that 41% of the parents surveyed were still providing some financial help to their grown children, ages 23-28. “Only half of these parents (52%) say their kids are already fully independent; 35% expect their kids to achieve independence by the age of 30; 8% by the age of 35; 2% by the age of 40; and 4% say possibly never.”
Create a smooth transition into a self-sustaining adulthood by arming your children with skill and know-how. Teach them the price of every-day living by directly involving them in the household upkeep and meal planning. Set an example by turning off lights in empty rooms, make them assist you in home repair projects, as well as regular cleaning. Once they’re directly invested in a home’s maintenance, they’ll be more likely to take care of their things and make them last longer. When they’re old enough, help them plan, shop for, and cook at least one dinner a month. Regular trips to the grocery store with you will teach them about comparing prices, transactions, coupons, and how planning ahead often saves money. By giving them this regular, hands-on experience, kids will gain a greater appreciation for the cost of living. Dependence on you will decrease, because you adequately prepared them for what to expect.
If schooling children in financial matters scares you because you, yourself, lack the proper knowledge, then make money a life lesson you tackle together. Start with the basics–living within your means and maintaining a budget. Stress accountability. Take a financial literacy class together. Help your children understand the consequences and effects of fiscal decisions. Once they understand this, they’ll naturally be more cautious, and, hopefully, wiser than you were at their age, with money.
Jesse Mecham is founder of the financial software company,You Need a Budget—because you do! Based on four fail-safe rules, Jesse’s revolutionary software teaches a methodology that helps people break the paycheck to paycheck cycle, get out of debt, and save more money faster. You haven’t budgeted like this.
Photo by adam*b