Well, I came across a great episode of Dave Ramsey on the Fox Business Network the other night dedicated to this very subject, teaching kids about money.  As Dave spoke and received calls, I learned some great tips.

Most importantly, we have to be intentional about teaching kids about money.  I think with many things, if we’re not teaching, they’re going to learn elsewhere.  And that elsewhere, could be far from the values in which we as parents hope to instill in our children.

Teaching young kids about money

All children young and older need to learn 4 key lessons when it comes to money.  A child who is 4 years old can start learning these principles.  Children need to learn how to work to earn money.  Once they’ve earned money, they need to learn how to give, save and spend it wisely.

Work

The first principle a child needs to learn is work.  When you work, you earn.  A good way to teach this principle to a child is by paying them for chores around the house.

When the chore is completed pay them immediately so the child understands what he or she did to earn the money.  When you wait until the end of the week, you children can’t remember what they did to earn the money.

Increase the work as the child gets older.  You can also move to a less frequent pay schedule such as weekly.

Create a chore chart which is updated every time the assigned work gets completed to track work and its completion.  As an example, our 4 year old daughter gets to place a sticker on her chart when her toys are put away properly.  While we haven’t started letting her earn money yet, she loves getting stickers and see the reward in performing her work.

Save, give and spend

Once the money is earned, teach the child how to save, give and spend by using three separate banks or containers.  Clear containers work great because the child can see the money accumulate in each of them.  As a child gets older, you can use giving, savings and spending envelopes versus the containers.

The best way to learn about giving and tithing is from watching mom and dad.  Show them you are giving and tell them why.  They will learn to give out of love and not because it is a written rule.

When it’s time to spend, let your child withdrawal from the spending bank.  Teach them they can’t spend more than they have saved for the spending area.

Teaching teens about money

According to Dave Ramsey, teens will nag you to death for something at the store, or for $20 dollar bills!  “Every time you turn around they’re asking you for $20.”  Dave tells parents “don’t be an ATM machine for your teen!” Teens as well as younger children must be taught no means no!

Mom and dad can’t be so busy they don’t stop to put a money management process in place for their child at home.  Be a teacher and a coach for your child.  Don’t let college be the first experience a teen has in managing money!

Teenagers should get paid for their chores or work as well.  But the key difference is they have to manage the money with parental guidance and coaching.

The money should be deposited into the teen’s checking account.  They can then learn to manage money by creating budgeting envelopes for clothing, snacks, entertainment and gas (if old enough to drive).  Parents should coach the teen on how balance the account and track spending using the spending envelopes.

Never give a teenager a credit card.  Teach them to live on what they earn.  If little Johnny comes home from college with a pile of credit card debt, don’t jump to solve his problem.  Kids only get your money if they accept your coaching.  That’s an agreement you have to reach with your child.

There will be outside influences that go against your teaching, but all you can do is what you can do at home.  You can’t control everyone who comes into contact with your child, but you can teach good money management practices at home.

Recreation and activities for children

As parents of young children and teens, we’re all faced with the pressure to involve our child in a multitude of activities.  Some of these pressures come from our children and some pressures come from other families in our circles who are signing up their children for every activity available.  Dave provided some great tips in this area which are already becoming important for our family to follow.

Don’t overload your kids with too many activities.

Too many activities will burn them out and strain your budget.  Prioritize the most important activities with them.  Consider one activity per child per season to avoid overload.

Remain conscious of how much money you’re spending on activities and how they impact your monthly budget.  You don’t want to end up with 10% of your money allocated towards recreation because it’ll take money away from other critical areas of the budget.

Don’t go into debt for childrens’ activities!

Your kids need to know you have a budget or spending plan, which also means they’re on a spending plan.  If you don’t have the money it’s not the right time to sign up for the activity.

What about you?  How do you plan to teach your child about money?

Were you prepared to manage money?

How well were you prepared the first time to manage money when you had to support yourself?  Did you begin with a plan for your money?  Did you know the importance of giving, saving, spending wisely and ultimately, what it means to be a financial steward?  I venture to say the majority of society can’t answer these questions the way the would like to answer them.  No, most people aren’t prepared for their adult lives in the area of money.  We end up learning the hard way by strapping weights of debt to our ankles and dragging them around until we’re just too tired to drag them around any longer.   Obviously, at this point, we make a change.

Personally, I’ve always been serious about personal finance.  I got more serious about it when I got married because I felt a new responsibility towards my wife.  I got even more serious about it when we had children.  My children were  a good reason, amongst many, to put our finances in order, get out of debt and live as wise financial stewards.

Obligation to teach children about money

What are our obligations as it relates teaching children about money?  Scripture tell us we should train our children in the way they should go; the proper way, in my mind.  When they are older (when they get that first job out of school) they will not depart from parental training.

Train up a child in the way he should go, even when he is old he will not depart from it (Proverbs 22:6).

As parents, coaches and trainers we have a fantastic opportunity to prepare children to manage money wisely and hopefully, not repeat the mistakes of our past.  How do you plan to teach your children about money?

Ideas to teach children about money

• Start as  early as possible.  When a child understands money can buy things they can begin learning about the proper way to use it.
• Children can’t learn to manage money unless they have money that is under their care and responsibility.  Start your child on a small allowance.  Teach your child to allocate a portion of the money to giving, saving and spending.   I like the idea of using three banks for this weekly exercise.
• Teach your child the value of giving.  A great way is to teach them to give is with the church offering.
• It’s important for the child to understand the value of work and how to earn money.  Don’t let the allowance be for nothing.  Assign household responsibilities so the money can be earned.  Each household responsibility should earn a certain amount of money.  When the responsibility isn’t fulfilled, the money can’t be earned.
• Once the child has money to spend, teach how to avoid impulse spending.  Obviously, this is more challenging with the young ones.  But, a child can learn to shop around or wait before making a hasty decision.
• Teach your child to save money until they have enough.  Certainly, some things will cost more than their spending money will allow to purchase.  If the child doesn’t have enough money, it’s a great opportunity to teach this principle which will lay the foundation of avoiding future debts.
• Most importantly, teach your child what the Bible has to say about money.  Consider using Biblical financial principles as you coach through any of the above situations.

Photo by theritters.

Did you start getting more serious about money and personal finance when life also started to get more serious?  For me, that started when I first got married.  All of the sudden it wasn’t just about my goals anymore.  There was someone else in the picture.   Building an emergency savings, investing for retirement and paying off those school loans all became topics of conversation.  Going out and spending money without little regard for next month quickly changed.

A few years after marriage, the seriousness of family money talk typically changes even more.  That’s usually when husband and wife start thinking about having children.  Do we have enough money to have a child?  Do we need a house for a family?  Should we have our emergency savings fully funded before having children?  How stable are our jobs?  All of those questions either get discussed or are typically in our thoughts.  The truth, for those who have children, there is never a perfect time to plan their arrival.

With children in the picture, your life focus shifts selflessly to them.  You want the best for your kids and hope and pray they don’t make the same mistakes you did with money.  Therefore, if you’re like my wife and I, you’re motivated to set your finances in order, live debt free and help them prepare for their future.  Consider the below steps to help your children live debt free.

Steps to help your children live debt free

1. Position yourself well financially

You can’t jump ahead and focus on the future without taking care of your situation first.   Follow a good plan with intensity such as Dave Ramsey’s Baby Steps.  Eliminating debt as a top priority creates room in the budget for college savings and for expenses as children mature.  Not having a plan to cover expense with cash will limit your ability to follow the next two steps.

2. Set an example financially for your children

I believe the best thing you can do for your children is to set an example.  Children follow our lead and teaching them early how to give, save, avoid debt and spend wisely will help them learn how to mange money.   Proverbs 22:6 (NIV) says “train up a child in the way he should and when he is old he will not depart from it.”

Too often in our society children start managing money when they graduate school and begin their first job.  By this time, they experience the weight of debt from college credit card spending and school loans.  Become their money coach and guide early in their lives.

3. Position your children well financially

Once you are positioned and you’ve accepted your role as coach and guide, it’s time to position them.  Help your children succeed with money by saving as well as guiding them away from credit and debt.  As debt is paid off and avoided, you can begin to save for their future expenses.  Who doesn’t want to pay cash for their children to attend school, or help them purchase their first home?

Positioning our children to live debt free can change your family tree forever.  Set a personal goal to help them enter the work force debt free.

The next article in the series will discuss tools to help you Live Debt Free.  What do you think about these steps to help your children live debt free?

1. Live Debt Free – Biblical Advice
2. Live Live Debt Free – Fulfill Your Life Purpose
3. Live Debt Free – Avoid the Stress of Debt
4. Live Debt Free – Help Your Children
5. Tools to Live Debt Free