One of the first things people will tell you about kids is that they're expensive.
They require things like food. And clothes (increasingly more fancy clothes the older they get, apparently). They require entertainment items and shoes and after-school activities and you have to buy their friends birthday presents. Then, they have to go to the doctor....the dentist....and if they're my kids....you better put cash aside for three sets of braces.
Yes. Kids are downright spendy. And the thing with kids is they rarely realize just HOW expensive they are. They literally believe money fairies exist (and they collect teeth. Gross.)
So how, in today's climate of MORE and GIMME and I HAVE TO HAVE IT do you raise a money conscious child?
Here's eight quick tips that you can apply to your household to help your kids find good financial footing early.
1. Talk About How Much Things Cost. Often.
Now, I don't mean bore them with parental "Were you born in a barn, do you know how expensive HEAT is?!?" arguments. But, let them in on the actual number facts of how much everyday items are.
Keep it age appropriate, of course. For example, the other night my 10 year old said to my 7 year old (who was having a moment of sadness about moving to a new school) "Molly, don't you know Mom and Dad spent, like, $1000 on this new house!!"
Cue talk about actual dollar amounts.
Now, often 7 year olds and 10 year olds are just not going to get the gravity of what hundreds of thousands of dollars actually MEANS....but it's better than having NO clue what things cost and no perception of expense.
2. Give them a Commission, not an Allowance
Commission is based on work completed. So, when our oldest earns money, she has a specific task list tied to a dollar amount. Allowance is just giving a child money regardless of what they do to earn it. I want my kids to always attach work and money, money and work.
3. When they Purchase Things, Use it as a Teaching Tool
Now, you don't have to make a trip to the toy store a big old boring "life lesson", but I always make a point to say "That costs $9.00 and you only have $5.00, can you afford that?"....or things of that nature...if my kids have money to spend. I want to get them thinking about not only true costs but affordability.
4. Steer them From Impulse Shopping or "Reward" Bribes
Often I'll hear if I go to Target or something a well-meaning parent saying "If you're good here, we'll get you a toy" or bestowing some other sort of bribe in return for good behavior.
Now, in the past I HAVE purchased my daughters something small for weathering a particularly hard doctor's appointment or something, but good behavior at a store is expected, not something that should only be done because a reward is expected.
5. Explain Credit to Them and Lead them to Responsible Use
Whether you are anti-credit or credit-responsible, it's important to explain what credit is to your kids when it is age appropriate to do so. Teach them that when they have a bill they should pay it in full and on time. Teach them that borrowing money is never the first option.
Many kids get their first credit card when they go off to college, but it's not a NECESSITY. You can build a good credit rating or history without credit cards. I personally feel there is no need to introduce credit cards to someone.
6. Teach Simplicity and Contentment
I am big on "Contentment runs deeper than things" and although my children are incredibly fortunate, I try to keep things simple and teach them not to expect the biggest and best. Mostly because it isn't realistic and because I want them to know you can find happiness even with simple pleasures.
With regards to clothing, I would say about 90% of their clothing is hand-me-down or used. The new clothing is typically given as gifts for Christmas or birthdays. A lot of their toys are hand-me-downs or were received as gifts. Christmas and birthdays are exciting times for them because that ONE item they've wished all year for is typically given. It's not just purchased for them the second they want it.
Also, kids are simple....I can guarantee you that experiences and time with you is far more precious to them than the latest gadget or outfit.
I try to teach through living as well. We don't drive the best vehicles, my wardrobe is pretty sparse and mostly used, and I don't take them shopping often to see me spending indiscriminately....because that doesn't really happen.
It's entirely possible that my lessons in simplicity backfired on me, however. Given the times. I used to take my oldest to this local "Living History Museum" that I just ADORE. I wanted her to see what people lived like 100 years ago.
Naturally, this probably bored her to tears. Oh well. I tried. :)
7. Get them Started with Investing Early
We've all seen the compound interest charts where Person 1 starts investing with $100 a month at age 18 and it grows to millions even if he stops investing after 15 years. Then Person 2 doesn't start investing until he's in his 40s and doesn't end up with as much.
So, the day they turn old enough to "get it", march them down to Edward Jones and start them investing. They'll thank you for it.
8. Let Them Be Little
What's important, above all else, is to make any lesson age-appropriate and to let kids be kids. They don't have to be little financial experts. But, setting kids up for an educated financial future can only be a good thing.
My goal is to make sure my children know the value of a dollar, the cost of living, and that they know to connect work to money. I'm hoping that giving them these nuggets of information when appropriate will set my kids up to definitely not suck with money when they get older.