4 Easy Steps to Raising Money-Smart Kids

We may be asking too much of schoolteachers when imparting good money habits to kids boils down to four simple rules you can practice at home.

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Human beings may be destined to do everything the hard way. Consider teaching kids about money. Parents can do this quite simply, following a few guidelines. Yet few make any real effort, and we ask schoolteachers to fill the gap.

Parents are hands-down the most influential force in any child’s life, and studies show that this extends to money management. Yet the money talk still doesn’t happen in about half of all households.

Meanwhile, we have a global movement to bring financial education into the classroom. This effort has been clumsy at times though sorely needed. Too many kids go to college or get their first job without a basic understanding of budgets, debt, and saving. We ask the schools to address this need before the kids turn into bankrupt adults whose financial assistance boomerangs back on society.

(MORE: Communication Breakdown: If You Think You’re Talking About Money, Your Kids Don’t Hear It)

If only more parents took control, the lessons learned at school would resonate with what they hear at home and sink in to a greater extent.

Jonathan Clements is one of the few parents I know that has made a big effort at raising financially literate children. A former personal finance columnist at the Wall Street Journal, Clements is now the director of financial education at Citi Personal Wealth Management. He started family money lessons at age 5 with his children, who are now twentysomethings with, he tells me, enviable money management skills.

Clements believes there are four simple guidelines to raising money-smart kids:

  • Make them feel like the money they spend is theirs One way to do this is pay an allowance, explain what the money is for and never give in when they ask for more. “The first rule of parenting,” Clements jokes, “is to never negotiate with terrorists.” With young children, play the soda game. When you eat out offer $1 if they drink water instead of a soft drink. It’s shocking how often they take the $1. Pay allowance to a bank account so that they must make a withdrawal before they can spend.
  • Tell family stories that illustrate money values Clements’ own grandfather inherited and squandered a small fortune. He says he grew up hearing the story over and over from his parents; it ingrained in him and his siblings the lesson that money spent is not easily replaced. Share stories about your humble roots or how you struggled when starting your career. That way your kids will understand they must work to earn their lifestyle. “We all had cockroaches in our apartment at one point,” Clements says. “Don’t be afraid to dress up your story a little bit for emphasis.”
  • Lead by example Even if you are not a financial whiz (and who is?), you can set a good example by paying your bills on time and staying out of debt troubles. “If your kids know you’re up to your eyeballs in credit-card debt, they aren’t going to pay much attention to any wise words you might have about managing money,” Clements says. “Your kids are more likely to do as you do, not as you say.”
  • Manage expectations In their teens, Clements’ kids clearly heard what Dad would and would not pay for as the kids reached adulthood—how much he would pay toward college, what kind of support they could expect after college and how much he would pay towards a wedding. This gave them a realistic sense of what was coming and “no bruised feelings” later.

And there you have it. The hardest part may be consistency with your message and, for some, staying out of money trouble themselves. That’s all the more reason to commit to a plan like this, which will benefit you too.

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15 comments
ForbesBenny
ForbesBenny

I am having problems in saving money :( So what I do is I read a lot of blogs on hbr and seth godin's typepad and Vivek Sood's blog. I learn a lot from the author Vivek Sood with his  The 5 star business networks talks about  different business trends, models and strategies that can help students and business execs in making their business flourish. So what I do is go on business - so that I will have lots of money - then i can save that way. I just need to increase my salary. ugh. work hard.

Kitty Myers
Kitty Myers

Show empathy, volunteer often, random acts of kindness. The kids always watch our behavior.

Ansa Wiid DeWet
Ansa Wiid DeWet

We need help to get the word out in the world I beg you fore the sake of the lives of out children.

Ansa Wiid DeWet
Ansa Wiid DeWet

The truth,about 40 miljon black oppresion on the 5 miljon white people in south africa.. we are being robed murdered raped and finansialy abused. ... and that after 20 years of so caled black freedom. Our media are being under lock down.

Ansa Wiid DeWet
Ansa Wiid DeWet

(Gordon) NGO 'too white' for donors 2013-04-23 Jacaranda Children's Home in Pretoria has lost a large amount of sponsorship because the majority of its beneficiaries are white. The centre cares for abused children Clad in a tracksuit with an image of his No1 superhero Spiderman, six-year-old abuse victim Jimmy (not his real name) and his peers play happily on the grounds of the Jakaranda Children's Home. EmailPrintThey are oblivious of the predicament facing the place they call home - it is not black enough. Corporate donors that covered 70% of the Pretoria home's more than R25-million annual running costs have pulled out because, the centre says, the majority of children it houses are white. Jimmy and 350 other children were removed from their parents because of abandonment, neglect and emotional and physical abuse. They will soon have to survive without privately funded child development programmes, or worse, they could find themselves without a home. "There's nothing we can do about it . it's a sad situation," the shelter's marketing executive Elzane van der Merwe says. The children are victims of the Broad- Based Black Economic Empowerment Act, she says. The act stipulates that for companies to be allocated BBBEE points, they must donate to charities whose beneficiaries make up at least 75% quota of the previously deprived race groups. At the Jakaranda shelter, 75% of the children are white. For the past two years, the shelter received R7.1-million in government funding a year, which has been increased to R9.1-million for this year. However, Van der Merwe says: "Without corporate funding we cannot continue with therapy and educational and sporting programmes. These are crucial to a child's proper development but without funding we will have to offer the basics like shelter, schooling, food and clothing." She said companies still donate to the home but private funding had declined by 70% in the past three years. Van der Merwe related an incident in which a company pledged R100 000 but pulled out at the last minute after realising that the majority of children were white. She said the home did not decide which child was placed at the home. It got applications from social workers and the children were placed at the home according to their needs by the court. The shelter's Ancha Smuts said: "With government funding, we could keep going but there'll be no extra development programmes." Ancha urged companies to look beyond colour or BBBEE points and continue funding the NGO for Jimmy and other children's sake. Head of Childline, Joan van Niekerk, said the regulation was particularly problematic. "We receive over a million calls a year from children and we deal with about 20000 online counselling [cases] but we do not see these children and we cannot say to a distressed child: 'We have reached our proportion, sorry we cannot help you'," she said.

Catherine Puleio
Catherine Puleio

Teach kids to respect their elders-- teach them how to cook, how to write a letter & how to survive in this Crazy World. Take all their Electrical Must Haves-- Computers/PS3's/ iPhones etc etc. "Save a little - Spend ALOT. Enjoy it as Here today-- Gone tomorrow"..... We are the only Species on this Universe who have to pay to live on it---- Sad Huh?

Brian Patnoudes
Brian Patnoudes

Perhaps all of you critical thinkers can take it for what it's worth?

Antonio Bracero
Antonio Bracero

Any tips on how to teach kids empathy ? Or on helping others? Any guidelines on social conciseness ? Perhaps meditation? I think these are far more important lessons for kids.

Terenda Ayesh
Terenda Ayesh

If you really want advice on teaching the kids about money check out Dave Ramsey

Յակոբ Պիւլպիւլեան
Յակոբ Պիւլպիւլեան

but some people should have moral ground in not interfering too much after all money is not every thing and conditioning theory is not a 100% working one