PARENTING

IMPARTING FINANCIAL WISDOM

TO YOUR CHILDREN

WRITTEN BY T.E. CUNNINGHAM

There are many lessons to teach in your child’s journey to adulthood, but an important one that is often overlooked is teaching your child how to manage money. Our desire to not have our children “want” for anything sometimes impedes the practical necessity to learn the basics of living on your own as an adult.

It’s never too early to teach your child positive money lessons. Here are ten lessons to help you get started.

1. Open a checking account and a savings account for your children with you on the account. Order a handful of checks. Open joint accounts and set them up for online banking. Teaching your child at an early age how to read a bank statement and understand deposits, withdrawals, and compounding interest will serve them well. It is also a precursor to some of the following lessons.

Mitch Ashlock, chairman and president of First Federal Savings in Olathe, encourages you to also “start working with kids at a very early age to help them learn and understand how to count change. With the increased usage of debit cards, credit cards, swipes, and taps, it has become more of a challenge for children to know how to make and verify change, as well as truly understand the value of money.”

2. Give them a job, not an allowance. Your first message to your child should be that money is not given; it is earned. Instead of a weekly allowance, send your child a paycheck once a month. Write up a “job description” and review it with them. Explain that the job has to be performed consistently and well, and then pay them monthly via check or direct deposit into their account. Doing this monthly is a good lesson in balancing money demands over a more extended period of time.

3. Teach them to save a percentage of earnings (at least a third). Skip the piggy bank jar and have

them deposit their savings in a bank.

4. Model the behavior you want them to aspire to—be a good example. If you want your child to save, show them that you save. You don’t have to overshare your financial situation, but let them see enough to know that you practice what you preach. Don’t argue about finances with your spouse in front of your children, but do let them see you review a monthly budget or make “cost-cutting” decisions. Set rules for how often you dine out or splurge on extras; these are things they will notice at a very early age.

5. Let them make purchases on their own. This is difficult. I grew up living below the poverty line, so I found myself wanting to give my child things I never had. That’s a trap, and you should avoid falling into it. Instead, help your child plan how to earn and pay for what they want responsibly. If you want to be a part of it, create a “matching” plan with your child to complement their savings efforts toward the purchase.

6. Teach them how to shop wisely, utilizing topics such as:

• Making cost comparisons on the identical product;

• Evaluating quality products vs. cheap products and analyzing the durability;

• Explaining what opportunity cost is—if you buy this, you can’t afford that;

• Taking time to make purchases to navigate away from impulse buys.

7. Teach them to be charitable. Help your child select a charity or cause to donate to, and take the time to research it with them. 8. Teach them to save money for college or higher education. While you may plan to pay for this, it’s still worth your time to have them save a portion of their money. It’s also an excellent opportunity to discuss student loans and to avoid them at all costs!

9. Good debt vs. bad debt. This is a more complex subject to teach at an early age, but begin to build a credit history for your child by applying for something together. One possible option is a low-limit AMEX card which must be paid off every month. Introducing them to the concept of never running a balance on a credit card is important. At the same time, you can explain how investing in real estate can be a smart financial decision, even if you are paying interest.

10. Teach them that money isn’t everything and to enjoy all that life has to offer—not just material things.

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