Tools for Teaching Your Children About Money

Despite, at times, all indications to the contrary, your children are watching and listening to you. As a result, parents have a huge influence on their children’s financial behavior. What’s more, habits surrounding money are formed at a very young age. We all need to learn how to earn, save, invest, consume and give our money. These skills are as basic to life as cooking and doing laundry.

To help develop responsible financial habits in your children, talk about money in front of and with them. Let them watch you pay bills and reconcile your bank and credit card accounts. Show them that handling money is a normal part of everyday life. Conversations can be appropriate for their age and ability to understand.

It’s also wise to start early and show kids what money is and how it is used. Put coins and various bills in a jar, and demonstrate how money is added (earned) and removed (spent). Have them add up the total in the jar and keep a register. When you buy a toy with them, have them take money out of the jar and give it to the cashier. When you get back home, show them the total is less by the cost of the toy they purchased.

Don’t just give kids an allowance. Instead, have them earn money by doing chores or assuming other responsibilities around the house. Perhaps they can earn different amounts based on the chores they are willing to do. Mowing the lawn might earn them $10 while taking out the trash and keeping their room clean may earn them $5 per week.

The money they earn should go in three separate jars, labeled “savings first,” “sharing” and “spending.” The savings jar can be used to teach delayed gratification. For example, they will be able to make larger purchases by saving a little of each “paycheck” or birthday gift. The sharing jar is used to give to others in need, or maybe to buy a toy for their sibling. When you pass the Salvation Army’s red buckets and bell ringers, putting in some of your money and having them put in some from their sharing jar demonstrates how this works.

When your children want to buy something, have them decide if they are willing to spend their money for that item. Kids need to learn to make responsible choices and understand how purchase decisions will impact them. Let your children make mistakes and have regrets about spending money, without bailing them out.

Most likely your kids will see you use credit cards on a regular basis. Explain how they work and that money will come out of your “jar” at the end of each month to pay for everything that you charged to them. Show them the credit card statement, and explain what the penalty would be for not having enough money in the bank (or jar) to pay the current balance. Once your kids are adults and off to college, it is easy for them to get into trouble with credit cards if they don’t fully understand the potential pitfalls.

When they’re old enough, open bank accounts for your children and have them transfer their jar money there. Teach them about making deposits, writing checks and keeping track of the account balance. Once they get their first job, they will learn how a regular paycheck grows their money and allows them to purchase more of what they want.

Teaching your children to become self-sufficient and have realistic attitudes about money is a gift to both them and to you. Giving them the tools to succeed financially will hopefully keep them from returning home to live with you during your retirement years.

This commentary originally appeared January 7 on CasperStarTribune.com

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The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2018, The BAM ALLIANCE

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Connie Brezik, CPA/PFS, CFP®

As a wealth advisor at Buckingham Strategic Wealth, Connie works with clients to form a comprehensive financial plan tailored to their individual circumstances, one that includes portfolio management, tax strategies, wealth transfer considerations, retirement analysis and education planning. She welcomes the chance to help clients work through difficult situations, finding solutions that they may not have thought of and guidance about what to do if their plans don't work out as anticipated.

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