Children
The
greatest practical gift you could ever give your children is a solid
understanding of money management principles. Surveys show
that more than one-third of kids ages 12 to 17 still use a piggy bank to
save money. And more than half have received no financial education
at all. Understanding the
value of a dollar, the magic of compounding, and the dangers of borrowing
money to buy things that go down in value are some of the key principles
that will help your children build a solid financial future. The
three critical areas that must be instilled in children in the area of
money management are:
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God owns it all (see GIVING)
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Self discipline and moderation (see SAVING) - Learning the difference between "No" and "Not yet".
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Everyone needs a budget (see BUDGET)
Teaching your children how to manage money requires that you become very pro-active. The teaching and training process must become a lifestyle. The most efficient way to teach your children is by example (Proverb 20:7; Deuteronomy 6:5-7). Therefore it is imperative that you become a living example of what you want to teach. Even if you have made mistakes in the past, you must become committed to living a life in the future that will provide your children with the example they need. Your family and the decisions that you make with your money might be the only opportunity your children have to experience the reality of money management before they go "solo".
As your children grow up, the many opportunities for life lessons will be constantly changing. It might be as simple as making choices for the best value when grocery shopping or as advanced as helping you decide on a future auto purchase, a new house or how to best distribute your investment savings. The teaching and training opportunities are never ending. Parents must continually remind themselves that the teaching process is most effective when it is done in love (Ephesians 6:4).
The average student graduating from high school can't balance a check book. It's not because the child is not loved by his/her parents but due to the fact that most parents just assume that their children will learn what they need to know about money management at school or as the situations arise. In many families, the parents are so far behind in their own understanding and practice of basic fiscal responsibilities that they are unable to help their children. The children are then destined to be conditioned by a debt ridden society where seven out of ten families are living paycheck to paycheck with credit card balances at the maximum limits, driving financed or leased cars that far exceed the reasonable limits of their income and unable to save while spending more than they make each month.
Teens today are well on their way to a life burden with debt. As reported by Teenage Research Unlimited of Northbrook, IL (1/25/01), "...30 percent of teens are interested in getting a credit card, while 42 percent of teens aged 18 and 19 already have a credit card in their own name. Another 11 percent say they have access to a parent's credit card."
"The number of undergraduate college students with credit cards has hit 83%, a 24% increase since 1998. A new study also found that 54% of freshmen students own a credit card while only 23% have a student loan." Source: CardWeb.com
"College students represent 19% of the people who file bankruptcy." T.R.U.
"Recent statistics state that most college students graduate with well over $20,000 in debt (not just student loans)." T.R.U.
"The average credit card balance owed by graduating college seniors across America is $3,000." Source: Cardweb.com, Frederick, Maryland
You must ask yourself, do you want society to be your child's teacher? If not, then the road to teaching your children how to become wise money managers begins with YOU (see all the great links for teaching kids about money and Money Management Bible Study - "Teaching Children").
After making the commitment to steer your family in the right direction, you must then realize that IT'S NEVER TOO LATE TO START, but the longer you wait the more difficult it will be. START NOW!!
FAQs
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What should I be teaching my children at the different ages?
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Should I buy my child a car when they get their driver's license?
Teaching children about money should start at a very early
age. It should be an open topic for conversation rather than
something that is talked about in secret. As children grow up, they
are conditioned by their surroundings. What they see their parent do
and hear them talk about often results in the development of their own
personal convictions. These convictions are the foundation for the
decisions and choices that they will make in later life once they are
independent and living on their own. For example, a young person who
grows up in a nice home in the comfortable surroundings of new autos and
name brand clothes is conditioned to believe that is the standard.
But they might not be aware of the fact that their parents are living hand
to mouth burdened by tremendous debts and constantly fighting about money
behind closed doors.
It is essential that children be taught certain key principles about money BEFORE they are faced with making these decisions on their own. It only takes a few bad choices to set up a lifestyle of financial disaster. Parents should realized that it IS your responsibility to train and educate your children but you are NOT responsible for the choices your child makes once they are own their own. If you have provided your children with a good example and trained them in the basics of money management, you should be commended.
Below is a list of topics by age groups to consider when teaching your children about money. There are many different ways to work these topics into the daily lives of your children. The key is to be flexible yet proactive. You will find that as you teach your children about money, they will become an excellent way to keep you accountable to them for the decisions you make concerning your money.
During the ages of 1-10 the basic attitudes are being formed that begin to mold the child's character. The mid years of 11-16, the previous years of conditioning start to show up in the child's convictions. The last years of 17-21 are the years of reality training.
| AGES 1-10 | AGES 11-16 | AGES 17-21 |
| Ownership/Stewardship | Budgeting | Credit & Debt |
| Orderliness/Excellence | Spending/Saving | Work/Vocation |
| Relative Value | Compounding | Autos |
| Sharing/Giving | Taxes | Insurance |
| Responsibility/Reward | Smart Shopping | Mortgages |
| Intro. To Budgeting | Checkbook | Investing |
The main purpose for an allowance is to allow a child to learn how to manage money. Children need to learn how to give, save, and spend. These lessons are best taught when a child must do this with money they call their own. I prefer not to give children an allowance but rather rewards for assigned task. However, if an allowance is given, it should be given only when the child has accomplished required daily chores on a regular basis. Giving a child a set allowance weekly or monthly without a requirement to accomplish task or jobs is nothing more than welfare. This welfare mentality encourages a poor work ethic and defeats your efforts to teach the important lesson of the value of a dollar.
Although a child's primary work responsibility is his/her school work, paying them for good grades can create a negative reward system. Grades are a measurement of relative performance in the classroom. If you decide to pay your child a set amount for every "A" they make on their report card, yet they bring home all "Bs", the child senses failure. If your child did their personal best in every way and was unable to make an "A", was it failure? No!
Students should be encourage to perform at their personal best. Regardless of the grade, when a child performs at their personal best, they should be praised. Rewarding for grades can create motivations in the child to find ways to make a grade rather than learn the material and develop good study habits. Some children might even be tempted to cheat in order to obtain the reward. This can result in the development of a multiplicity of negative character traits that can carry over into other areas of life.
Parents should monitor and assist in the development of good study habits in your children. Teaching organization skills and time management are key to being successful in academic endeavors beyond the high school level. The parent should also hold your child's teachers accountable for their actions in the classroom. In both public and private school systems, the teachers are your employees. You pay their salaries and expect them to manage the classroom in a fair and equitable manor. In our competitive society, grades (especially 9th thru 12th) are important when it comes to acceptance into colleges and universities.
At an early age, children should start learning the value of money. This is best done when they accomplish task in return for rewards. During their early years, value can be taught with relatively simple task and small rewards. As they grow older the jobs should become more demanding and the rewards larger.
With the abundance of domestic task available in most families, working outside of the home is not always necessary. However, children need to also have domestic responsibilities (chores) that are unpaid. For example, a child might be assigned to keep their room clean and made up daily. They might also take the trash out, care for a pet, do the laundry or help with kitchen duties during meal times. Then for extra paying jobs, they might clean out the garage or attic, wash cars or do lawn work. They might also offer to wash neighbors cars, do lawn work or baby sit.
Working outside of the home such as in a retail store creates other opportunities and concerns. Deciding to allow your children to become a part of the part time work force should not be made without first evaluating the time commitment, working environment and the particular needs of the young person. For example, a part time summer job might be a great opportunity for a young person to learn about discipline and respect for authority as an employee.
The goal is to use any working situation as a means to an end. The end goal is to teach and train your children to become wise and responsible money managers. The value of any job is not found in the money the child makes but the life lessons that are learned and that can be transferred into adult life.
Most young people in their teens wait anxiously for that special birthday when they turn sixteen (some states may have a different age limit to obtain a drivers license). It's a time of increased mobility, freedom and from a parental perspective, responsibility. But is it a time for parents to present their young teens with the keys to their very own auto?
In a majority of American middle to upper class families, an auto is standard issue with each new driver's license. I believe the problem exist not with the fact that an additional auto is added to the family fleet but the issue of ownership. When children are unemployed, they are unable to "own" items that require money to operate and maintain. When a child is conditioned to believe that a particular auto is "theirs" yet they have no financial obligations (maintenance, gas, insurance, etc.), they lose the proper perspective of the value of a dollar. The time is limited for parents to teach their children the value of money. Every opportunity available needs to be used to help equip our children so that they become fiscally responsible adults.
The child may use a particular car from the family fleet more than another but needs to know that all of the cars belong to the parent. It might even be a good idea to insure that your young driver drives all of the family cars periodically to discourage the concept of ownership. When a child is given ownership to an expensive item such as an auto without the financial responsible, it becomes increasingly difficult for them to identify with the reality associated with auto ownership.
I call it "reality training". Our children grow up in a bubble of isolation and security. One day that bubble is going to pop and they will be forced to meet reality head on. How can you as the parent help them prepare for the transition?
Think of your children as young adults in training. Our goal as parents should be to equip our children for the future in every way possible so as to help insure that they will have the best possible opportunity to live life skillfully and with much success. Many times we find that we have limitations as to the depth that we can help our children. Parents may not always have all of the answers but should be resourceful enough to be able to find someone that can help. The key is to be proactive even though at times it feels as though you are trying to put a square peg in a round hole.
The options for young people today are endless. Educational opportunities exist for those who diligently pursue them regardless of family income limitations. The problem facing most young people is two fold. First, their world is filled with an endless supply of distractions from reality and secondly, most parents are so busy in their own lives that they normally don't have time (or make the time) to provide the necessary coaching required to help their children focus on future professional dreams and opportunities. This is why many children default to following in their parents footsteps or opt for the first thing that comes along in the way of employment.
The following are few suggestions that can be used to help you coach and mentor your children as they seek to find a vocation and future that is best suited for them:
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Be a good example (mentor) to your children in regard to the way you manage your money and finances.
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Constantly encourage your children that they can do anything they want if they prepare themselves and remain focused.
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Encourage your children to maximize their potential by seeking to perform at their personal best in all of their endeavor.
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Talk openly and frequently about money around your children (what things cost, how much it takes to live certain lifestyles, what different career fields pay, etc.)
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Help them discover their interest by focusing on things they enjoy or do well (math, science, computers, creative, leadership, etc.)
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Make sure they understand the difference between an area of interest that is suitable only as a hobby and one that can provide a foundation for a career.
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Expose them to as many people and environments as possible in areas that they show interest. Take mini field trips or ask a friend in their area of interest to talk with them or show them their work up close.
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Use the abundance of free material on the internet to research areas of interest, career opportunities, salary levels (entry level and career maximums), educational requirements, etc. (see links)
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Assure them that God has "wired" them in a very special way. Their task (with your coaching) is to find the perfect place that best utilizes their gifts, talents and interest.
