The start of a new year is a perfect time to refocus your efforts in key life areas such as your financial health. It’s a natural starting point for creating a budget if you don’t already use one. Or taking a look at the books to see if your spending and saving lines up with your stated goals. But talking about financial savvy shouldn’t be limited to the grown-ups. Your kids should be aware of your family’s financial priorities and be active participants in meeting those goals. Being money smart is a family affair!
It’s easier than you might think. For instance: Our family places a limit on the dollars we’re willing to spend dining out in a given month. My husband, noticing that beverages can cost as much as $2 each in many restaurants, has pointed out to our children that by choosing water (free—a savings of $8 on average for our family of four), they can stretch those “dining out” dollars into more meals. It’s a trade they willingly make now. It’s his way of training them to “manage their pennies so that their dollars take care of themselves.”
There are a host of ways to make your kids a part of your family financial management team while training them to be fiscally responsible in their own lives one day. Check out these 4 Ways to Make Your Family Money Smart.
1. Bring your kids into the “big picture” financial loop.
One day, it occurred to me that our children didn’t have any idea where were are on the financial spectrum when my daughter asked, “Mom, are we rich or poor? Or somewhere in the middle?” She really didn’t know. But knowing (at least in part) opens the door to some great conversations about money. The truth is: While our family has been blessed with more than we need, my husband worries that too much transparency with the kids regarding those blessings could dampen their own desire to work hard and save. And naturally, the amount of information your child needs varies with age and maturity.
In our case, the approach has been to talk to them about the big picture in very general terms, without lots of hard numbers. We talk to them about the things we’ve invested in to earn money for their future education and how we’re planning to provide for ourselves in retirement one day. We want to make them aware that these things don’t happen magically, without thought and effort.
2. Bring your kids to the budget table.
This may be the single greatest teaching experience at your disposal. Allow your children to sit in—and even weigh in, to a degree—on the budget-setting process for the family. Having them see that there’s a finite amount of disposable income in any month (and that it can’t cover every desire) is priceless. What’s more, when they were present for the conversation in which it was decided that there was only X amount allotted to clothing, the cell phone bill or dining out, they might be less likely to beg for more than the budget allows. Let them see what the financial hierarchy looks like: putting aside savings and giving to the church/charity first, then paying essential bills like utilities and groceries, and holding off on spending for nonessentials until those things are covered. Try out Dave Ramsey’s easy budgeting tool to get started!
3. Let your kids manage some money of their own.
Whether it’s a small allowance or cash paid to your children for chores, kids need to go through the process of receiving money, deciding how it will be used, and making sure it makes it to the intended destination. This is a great time to use our Share, Save, Spend tool to help them develop good habits, even when all they have to manage is a few dollars! Let them feel empowered to make money decisions, and let them live with those consequences. (In other words, don’t be too quick to bail them out when they mismanage and have regret).
4. Talk about the financial headlines with them.
There are frequently news reports about the spending and saving habits of Americans and the effects these habits have on individuals and the economy. When a story about Americans with credit card debt comes on the news, talk about it with your kids. Explain why too much debt is a bad idea and how it reduces the number of choices you have in your life. When you see a headline about how much less people save these days, talk about the importance of saving and how it can reduce the financial stress in your life at every age.
Sometimes the financial headlines hit close to home and your family is affected in a negative way. Whether its a job loss or some other difficulty that’s shaking up your financial picture, you can talk to your children about it in a way that’s educational and beneficial. Sometimes the best lessons sound something like, “We messed up, but we’re getting back on track—here’s how.” There are money lessons all around us, just talk them out!
How do you train your kids to be money smart?
Dana Hall McCain writes about marriage, parenting, faith and wellness. She is a mom of two, and has been married to a wonderful guy for over 18 years.
