August 23, 2018
As a new academic year begins, I want to make sure that parents understand the important lessons that will not be taught in school.
It is the rare school that offers any education on how to have a healthy relationship with money. There is no discussion of what it costs to support a family, taxes, the importance of saving, the power of compounding, the downside of living beyond your means.
Your child may be the next valedictorian, but I am telling you that if you don’t take the time to teach key money lessons there is no way your child will be able to thrive in the real world as an adult.
A few key strategies to raise a child with a strong, empowered, healthy relationship with money:
• Allowances are to be Earned. Not Given. Doesn’t matter if your child is 5 or 15, you must give her age-appropriate jobs around the house that, if completed, will result in her being paid the agreed upon allowance. For young children, allowance should be weekly. It can be longer for teens—along with some expectations of what they will pay for during the two weeks/month from their allowance. That’s an important lesson too.
• Create a Three Bucket Strategy. A child’s allowance should be divided into three buckets: spending, saving, giving. I will leave it to you as a family to decide what percentage to assign to each bucket. Just make sure all three are addressed. You want to teach the value of saving and giving, while also giving your child the freedom to spend some of their earnings.
• Make Bill Pay a Family Activity. Once a child is 10 or so, have them help you with your online bill pay. That’s a natural way to make them aware that all the everyday things they are used to—the hot water for the shower, the electricity that keeps the lights on and their gadgets charged—costs money. Have them help you pay the insurance premiums, and especially the cable and cellphone bills. This becomes an opportunity for them to learn about spending choices, and for you to strategize as a family on whether you might be able to save on some bills, to free up money for other financial goals.
• Live What You Want Your Kids to Embrace. When you enjoy saving as much as you enjoy spending, you are giving your kids an incredible foundation. When you live below your means but within your needs, you are showing children how to avoid financial bondage. When you plan for life’s what ifs—an emergency fund, the right insurance coverages—you are passing on the secret to living life without financial fear. That’s the most valuable education there is. And it’s on you to do the teaching.