Last Christmas break we took a family vacation to Costa Rica. We were spending the day on a beautiful beach when a vendor approached us with stunning smoothies served in pineapples, complete with cherries, mango, and mini umbrellas – for $20 USD.
My daughter’s eye’s lit up as she begged for one. My response, “If you want one, you should absolutely buy one.”
As she mentally calculated how much that $20 would dent her personal cash stash, a powerful realization dawned. She decided to walk down the street instead, where she found a less showy, but equally delicious, smoothie for $6 USD. She was incredibly proud of herself, and I was even prouder.
If you’ve followed my work for a while, you know I often discuss how money habits, behaviors, and even financial trauma can be passed down through generations. It’s true that our parents profoundly shape our relationship with money. Without intentional effort to understand and challenge those inherited messages, we often unknowingly pass the same patterns on to our children.
So, how can we help our kids build a healthy, empowering relationship with money from a young age?
First, they must grasp that money isn’t just about endless spending. It’s a powerful tool, and when treated with respect, it unlocks incredible opportunities in life.
Give Them the Chance to Earn and Spend: I don’t believe in allowances for simply existing. Instead, we create ample opportunities for our kids to earn money. Whether cleaning gutters, detailing the car, or mowing the lawn, they learn the value of work. And we encourage them to spend their hard-earned cash on things they love. Are you saving up for that new Lego set? That’s a fantastic, tangible goal!
Beyond Earning and Spending: The Three-Bucket Approach: In our household, we also teach them to divide a portion of every dollar they earn into three categories: give, save, and invest. My son has proudly donated to charity efforts to plant trees, and my daughter contributed from her piggy bank to a school fundraiser. For investments, we match their contributions dollar-for-dollar. They frequently ask about their earnings, and we often discuss how their money will continue to grow when invested – introducing them to the magic of compounding early. Compounding is like a snowball rolling down a hill-the more it rolls, the bigger it gets. Similarly, when you invest your money, it grows over time, and the growth itself also grows, making your money grow even faster.
Involve Them in Family Finances: Parents are busy, and often, we avoid discussing money altogether, perhaps with good intentions of “protecting” our kids. However, this can have the reverse effect, inadvertently teaching them that money is a taboo, stressful topic that shouldn’t be discussed openly. Too many adults lament, “My parents never taught me about money.”
Teaching kids about money isn’t an exact science. It’s about trying different approaches and knowing it’s okay to pivot. The key is to make money conversations a regular, natural, and even joyful part of your family culture – just like meals, movies, or exercise.
Empower Yourself As a Parent by giving your kids real-world financial scenarios. This will help them weigh choices and understand trade-offs, and it will give you the confidence that you’re preparing them for the future.
- For Younger Kids: Give them a specific task and budget, like shopping for a birthday gift. They’ll quickly learn about choices and limits.
- For Tweens: Ask for their input when considering a larger family purchase. Have them research the actual costs involved.
- For Teens: Entrust them with bigger family tasks, such as planning a party or even a vacation, with a set budget to manage.
- For College-Aged Kids: Challenge them to research the earning potential of a particular industry, create a hypothetical budget, and model what that lifestyle would realistically look like.
Lastly, Remember the Power of “No”: As a parent, it’s crucial to understand that you can and should say no when appropriate. If every answer, purchase, or decision is a “yes,” kids won’t learn the vital skill of self-control or the reality of financial limits.
That said, instead of a dismissive or guilt-ridden “We can’t afford it,” try these empowering phrases:
- “That’s not what we are spending money on today.”
- “That’s not how we choose to spend our money.”
- “We’ve decided to spend money on [X] versus this is more important.”
- “That’s not in the budget now, but how can we work together to make that happen later?”
As a parent, knowing you are in control and consciously choosing what’s important to your family is a powerful feeling. It’s not about restricting your child’s choices, but about guiding them towards responsible decisions.
Imagine a world where kids grew up with a solid financial foundation – how that could change the trajectory of their lives. Pretty wild, right? By taking these intentional steps, you can set your kids up for lasting financial success.
I’m curious – how have you instilled good money habits in your kids?
