Recently, a dad asked me if he should allow his 26-year-old son to move out of the house before he was married. His son wanted to establish himself as a man and gain his fiancé’s respect before tying the knot. The dad wanted his son to stay home to save money. The problem? Dad didn’t want him to leave, and his son didn’t know how to manage his finances.
Not educating our kids about smart financial practices and not letting them make decisions about their own money can produce character flaws: a poor work ethic, low stress tolerance, lack of motivation and a sense of entitlement. Of course, no parents want that for their kids.
Here are five tips to help prepare your children now — no matter their ages — so they will learn to be money-savvy:
Teach giving, saving and spending
Giving first, saving second and spending third is a basic plan, but many parents struggle with it. Though you need to be age-appropriate, by the time your children are 5, they can start earning their own money and dividing that cash into separate envelopes or jars for giving, saving and spending. As your children grow, so will their monetary responsibility and their ability to manage their money. By the time they launch, this plan should be well ingrained within them.
Pay for age-appropriate jobs
Your children can work for pay, but it’s important to understand that this money is a commission — not an allowance. In other words, they must earn their own money. When they work, they get paid. If they don’t work, they don’t get paid. Of course, some chores are just part of being a member of the family, but others will help them develop a solid work ethic and teach them that money comes from work — not from Mom’s or Dad’s back pocket.
Model your money habits
Let your children see you budget and give. Then talk with them about some of your money tensions. Let them see how you and your spouse make monetary decisions and how you hold off purchasing some items to tackle other priorities. Let them see you build a plan, work within the plan and reach the goals you set. They will learn more from watching than just hearing you tell them what to do.
Expose them to outside voices
For some reason, kids listen to advice from others better than the same advice from Mom and Dad. So find people who handle their money wisely and encourage them to speak into the lives of your children.
Provide a safe environment
I call a safe environment, where kids can succeed and fail, “controlled adversity.” The military does this in boot camp by creating stressful scenarios that teach without endangering anyone’s life. For example, consider sending kids as young as 13 on a missions trip and letting them figure out how to stretch their money and prioritize — all with a trusted chaperone nearby.