Kids Learn about $ from Parents

I've written articles about teaching youth about finances before.  I wrote about using games like Monopoly or the Game of Life to teach youth about budgets and incomes.

Rocky Credit Union goes into schools (those that let us in) to teach a class about needs vs. wants, online banking, debit cards, credit cards, and student loans.  In these classes I often ask the students "How do you learn about controlling your money?"   The usual response is from parents, friends or their job.  A few students have responded that they don't ask their parents because they are always in debt and can't teach them anything about handling money, and a few others have said they really haven't learned anything about money from anyone.  This is scary considering most of these students are grade 10 or 11 and half of them already have part time jobs.

There are 2 key things parents do to teach kids about money:  1. Teach by example, and 2. Talk to kids about money.

1.  Teach by example - As a parent, what are your spending and saving habits teaching your kids?  Are you saving for things, or borrowing on credit cards or lines of credit for vacations and snowmobiles?  Have you made a will?  Do you have life insurance?  Are regularly putting money away for retirement or an emergency savings fund?  Do your kids know you are doing these things?

Those are some hard questions to ask yourself, but your kids see and hear what you do.  I taught a Junior Achievement class last year.  The class was an entrepreneur class, so we covered the basics of how to start a business.  Many of these kids already knew the definition of sole proprietorship, partnership and corporation because their parents are involved in a business.  I was very impressed with how many of the answers these kids knew just by observing and listening to their parents.  What you do with your finances is teaching your kids, and they are watching and learning to do the same thing.

2. Talk to kids about money - In addition to kids learning by example, they also learn by what you say to them.  I mentioned in another article that when my oldest used to ask for things we would respond simply that "We don't have the money."  He ended up thinking we are poor because we never have money and started telling his friends that he couldn't do certain thing with them (ie. go to a movie) because we were broke.  My wife and I adjusted our response to "We choose not to spend money on that toy because we have chosen to spend money on swimming lessons, tae-kwon-doe, scouts and piano lessons."  

It's important to let youth know that spending money is a choice.  Once you've gone into debt to purchase something, you don't have a choice; you have to make payments to pay the money back.  But until then you have the choice of to buy or not to buy.  I know families that let the kids plan their vacation, giving them a budget and general guidelines and letting the youth pan what they are going to do and how they are spending the money.  Some families give their children a small budget at the beginning of the school year and let their kids choose their clothes.  Once a 13 year old sees that one pair of jeans is $80 and another is $25, they start to understand more about spending choices.

So, make sure you talk to your kids about money, the choices they can make, and don't be afraid talk about some of the choices you are making with your money and why you are making those choices.  It may help your kids in the future to know what their families went through to put them in hockey, band, or 4H.  Jerry