Tips and Advice
Helping Your Kids Make the Right Financial Decisions
As your children grow up so does their relationship with money. What was once a simple, inexpensive souvenir on a family vacation becomes the “must have” $200 sneakers for school. Although you’ve probably vowed never to sound like your parents or grandparents, we’re sure you’ve caught yourselves many times comparing your own experience with money and expecting your kids to completely relate. The thing is – they don’t understand and the conversation is a struggle. But, if you stick to these simple steps, you are likely to make the money talk more appealing to your kids and help them start early to prepare for a lifetime of financial success.
Earning is Working
Teach them how to make money on their own and working for others. Think about what are the needs of your child and the needs of your community. Try and find opportunities outside the home as well as inside the home.
One of the most frequently asked questions by parents is how much allowance to give children. For younger kids, a fixed amount to spend at certain events like a fair or sporting event works well if the parents stick to their plan and make their kids budget out their day with, lets say, the $30 they have committed. The child then has to buy ice cream, souvenirs, etc., all within the $30 budget. The child is then forced to think through all the possibilities of what to do with his or her budget.
When it comes to weekly allowance for older kids and teens, it is important to be clear on why you are giving an allowance. There are two schools of thought on this subject. One: allowance is based on earning. It’s payment for chores completed in the household such as taking out the trash or washing the dishes. Two: Doing chores is a family responsibility and payment (allowance) is sharing some of the family wealth, similar to working in a Co-op or “cooperative” structure. How much allowance? Just make sure that whatever amount you decide on is relative to what you expect the allowance to cover. Decide what expenses you want your children to pay for our of their allowance, what portion to save, and how much to set aside for charity.
Saving is Gaining
Teaching your kids early about saving is just as important as teaching them about earning. Start with the concept of simply keeping something “for later.” It’s also good to emphasize the importance of goals and use both short and long term examples. Remember, consistency is key. Try not to change your plan. If you decide to save 10%, then stick with it. If you start making exceptions, your child will too!
What to buy? There’s a baffling world of marketing and advertising eager to attract your child’s eye. It’s important to teach your kids individual thought and to be aware how decisions can be easily influenced by marketers and also peers in this new world of social media. Teaching your kids how to prioritize is essential. Weighing the difference between needs/wants/wishes is a good conversation topic.
The Spirit of Giving
Involving your kids in your household charities can start at an early age from teaching them to donate clothing and toys they have outgrown to baking goods for your local homeless shelter. Whether it’s monetary donations (some parents break this down to an actual percentage of earnings) or donating personal time, kids will prosper from helping others. Help them find a cause they believe in locally or online, and volunteer together.