No-one really likes talking about money - whether we have a lot or a little. How much we make, how much we owe, how much our house is worth, how much we have to spend - it's awkward, uncomfortable, and personal.
And we certainly don't want our kids growing up thinking money is an issue - again, whether we have a lot of money or a little. So often we just don't talk to them about money at all. If they need something, we buy it for them. If they want something, they get either a "yes" or a "no," but rarely are they given a reason or an explanation.
But the problem with children who aren't taught the difference between wants and needs or the importance of budgeting and prioritizing is that they grow up into adults without any notion of how to budget their money and an entire generation living beyond their means.
It's important to teach our kids about money. It's important to help them distinguish for themselves the difference between and want and a need, and how to budget their money to determine how much is left over for wants after the needs are met.
How do we do this?
Giving kids an allowance is a great way to give them some money to manage on their own (see Allowance for kids). The common rule of one dollar for each year of their age is the one we follow, and we base their allowances both on behaviour and meeting family expectations in general as well as weekly chores, which are age-appropriate with responsibilities increasing as they get older. This helps them understand the concept of work for pay and earning their own money. Out of this allowance we set aside everything over and above five dollars as savings - they each have their own bank account that they can monitor and watch grow, but they cannot spend that money until they're older. This helps to teach the importance of saving. The five dollars a week that they have left is theirs to spend however they choose, and we don't direct how they are allowed to spend their money but simply remind them that it is finite. We hope that this helps them to understand the actual value of money - if they want to buy a toy that costs twenty dollars, for instance, they know that it will take them four weeks to save up for it.
It's important to teach kids about how grown-ups manage money, too. We don't avoid talking about money with or in front of the kids. We don't discuss the specifics of the mortgage or anything like that - but when we're talking about various house projects, for instance, and they ask when the deck will be done or when the new counter will go in, we point out that these are extra things we save for and we only have so much each month to spend on extra things. When they talk about next year's Disney trip we remind them that Disney is an extra, a special treat that Mommy and Daddy have to save and set aside money for all year long - it's not a given. They understand that sometimes a big purchase has to wait until the next paycheque. (Mommy, being a small business owner, only gets paid once a month from my contracts and that date fluctuates monthly.) Even when we're grocery shopping, if they ask for a treat or something I might not otherwise buy we'll look for the store brand or item on sale instead. We don't overemphasize money or the cost of things, but we do try to make a point of teaching them the importance of budgeting and understanding that money is finite and spending needs to be planned.
And hopefully these lessons will stay with them as they grow up and they will learn to be responsible with their own money as adults.
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