In the age of Netflix, my youngest daughter rarely sees commercials on television but, if she happens to catch one, I know immediately by the chorus of “I want that.” She is an innate capitalist who has no idea (at the age of 4) that these material possessions come at a price. So as a parent, I want to know how to raise children who don’t go out and blow their allowance on everything they see on television.
With this in mind, Marmalade turned to Mary Hunt, author of “Raising Financially Confident Kids” to see if she could share some of her financial wisdom. Hunt and her husband owed more than $100,000 in credit card debt when their two sons were little and had to make difficult decisions. When their sons entered the sixth grade, Hunt put them on “salary” and every year their salary grew but so did their responsibility – from paying for video games at first to eventually buying their own shoes, clothes, cars and saving for college.
So, where should parents begin? Here are six thoughtful ways to help your kids become money smart, straight from the expert.
1) Choose words carefully when talking about money. “Parents should try to say ‘We don’t choose to spend our money that way” more often than they say, “We can’t afford it,’” advises Hunt. “That sends a message to children that parents make wise choices with their money, not that they are poor and poverty-stricken.”
2) Use coins with your little ones. It’s never too early to start. Even preschoolers can learn the ins and outs of dollars and cents. Hunt suggests using coins to teach them how to count and learn different monetary denominations. “Three- and 4-year-olds can learn to put pennies into one cup, nickels into another and so on,” she says.
3) Let them observe you paying for things. “Debit and credit cards are confusing to children because they require abstract thinking,” says Hunt. “Currency is real. Teach them that money is important in our lives because we can exchange it for the things that we need and want.”
4) Give an allowance framed by your family values. According to Hunt, children learn best when they are allowed to make their own independent financial decisions and are then required to enjoy or suffer the consequences – and it’s never too early to start. “Start small and start early with a weekly allowance,” she advises. “Make sure they have a clear understanding of family values regarding what they can buy and what’s not allowed in your home.”
5) Let family life emulate real life. “One idea is to require all members of the family to pay taxes on allowances to support the community,” said Hunt. “Require that kids pay 15 percent of their allowances to the tax jar. Once a year, call a family meeting allowing each member to present ideas and vote on how to spend the family’s tax revenues.”
6) Give your teenager some financial independence. Sometimes, for parents of teens, it’s a battle for control. “Teenagers want their parents’ trust,” says Hunt. “Allowing them to manage money and make independent financial decisions is an excellent way to give them what they crave but make sure to do so in increments that they can handle.”
For more resources on helping your kids build a healthy relationship with money, check out Hunt’s book or become a part of her organization, Debt-Proof Living. Also, encourage your teenager to read this for a primer on investing, and find out how a good community bank can help you do this, too.