How To Raise Money Savvy Children (hint: it's never too early, but it can be too late).
Raising money savvy children and teaching them to be financially responsible is like giving them the short cut to being self-sufficient. Every day, I hear horror stories from clients about their adult children that can't stand on their own two feet. And what happens? Parents end up picking up the slack “one more time”, often compromising their own financial security.
Let's Talk About It
Money is one of those very touchy subjects for most. Not having calm, rational conversations about money makes it very difficult to teach the next generation how to use their money wisely and become money savvy children. It is important to learn to have unemotional conversations about money. Think of it as any other tool. Would a talk about a hammer get you worked up? Of course not! Money is nothing more than a tool, one we use nearly every day. What is it about money that causes so much stress? Take some time to really drill down into finding your money trigger. Start taking baby steps to opening up the communication channel with someone you trust. Building the “money talk” muscle and showing your children there is no need to feel anxious or fearful when the topic comes up will help them feel comfortable asking questions. And by asking questions and building trust, they will learn about money in a positive, non-confrontational way.
Start your money savvy talk by asking your children to pick a money goal. It can be for anything, something they want for themselves, or something they want to do as a family. Break your goal down to manageable pieces. For example, say you have a goal of joining your high school class on a European trip. The cost is $1,800. It is September 1, and you just learned of this opportunity. The trip will take place in April, and you need to have your final payment in my March 31. and EVERYONE is going. You approach your parents with your best sales pitch, and they say flat out “NO, WE CAN’T AFFORD IT, COLLEGE IS RIGHT AROUND THE CORNER!!” So, what do you do? Give up, keep begging, hoping to wear them down, or figure out how to raise the money yourself? Here is what a Money Savvy kid needs to do. It is as easy as 1, 2, 3!
3 Steps to Becoming a Money Savvy Kid
1. Money Savvy Tip #1 – Create a time line.
a. In this example, you have seven months to raise $1,800, which equals $257 per month.
b. Or, you have 30 weeks to raise $1,800, which equals $60 per week.
c. In order for you to net $60 per week, you would need to work approximately 10 hours a week and earn approximately $8.00 per hour (don’t forget tax withholding unless you have a cash job). If you have other expenses besides your trip, you will need to earn more to cover them.
d. A part time job after school and on weekends should cover your needs.
e. What special skills do you have that could earn you money? Love kids, how about babysitting? Lawnmowing, computer repair (or computer lessons), tutoring? Put on your thinking cap and let your imagination soar! If all else fails, there is always the typical job at the local mall!
2. Money Savvy Tip #2 – Create a savings plan.
a. You know you need to save a minimum of $60 per week to achieve your goal.
b. Set up a separate bank account for this event.
c. Either set up an auto deposit to this account, or discipline yourself to go to the bank each week and manually make your deposit.
d. Your patience and perseverance will pay off! In no time, you will see your bank account grow, and before you know it, you will be enjoying your European trip with the satisfaction that you did it yourself!
3. Money Savvy Tip #3 – Create a lifestyle plan.
a. Now that you achieved this milestone, keep going, don’t stop!
b. Continue to save for other future goals, buying a car, contributing to your college education, etc.
c. Having a separate bank account for special goals makes it easier to discipline yourself to succeed.
d. You just taught yourself two valuable skills – paying yourself first, and living within your means. Congratulations! You just took the first steps toward enjoying a lifestyle of financial freedom!
3 Tips To Help Parents of Money Savvy Children
a. Parents, review the above lessons. Children have a hard time understanding the value of a dollar if they don’t have any money of their own to budget toward goals. There is nothing that helps create money savvy children than the satisfaction that comes from earning the money. When considering offering a child an allowance, how about giving one in exchange for special chores around the house? You will be teaching them a valuable lesson while getting some needed help. Try to pick a job that is age appropriate, and pay the appropriate rate. For example, if you would pay a stranger $25.00 to mow your lawn, make the pay scale the same for your own child, unless the quality of their work is in question. Giving them a handout will set false expectations, and underpaying them will be discouraging.
b. Show genuine pride in their desire to show they are money savvy by earning their own money to cover expenses.
c. This is a good opportunity to take a look in the mirror at your own saving and budgeting habits.
The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any group or individual.
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