By Michelle Cornish, CPA
We all know that kids are little sponges. They remember the darndest things. That’s why it’s really important to be aware of how your values as their mom are impacting them, especially when it comes to teaching your kids about money.
My kids have just started wanting to spend their own money (they are 4 and 6). This is really difficult for me because I’m a control freak!! I want them to save every penny but if I tell them they can’t spend their money on XYZ, they’ll never learn to manage their money for themselves!! The ultimate goal when teaching kids about money is to feel comfortable that they know how to deal with their money. This won’t happen if you are interfering or over-managing every step of the way.
So what can you do to help them learn money management skills?
Model the skills you want them to have!! This is where your values around money will influence what your kids learn from you. Here are a few examples of what you may or may not believe are important when it comes to financial management.
Living Within Your Means
This one can be a little tricky for kids to understand but if they always see you using your credit card and don’t understand that you still need to pay that debt, they will learn that it’s ok to pay for everything with credit. Try to use cash whenever possible and if you do use your credit card, make sure you explain to your kids what it is and how it works! Including mentioning the exorbitant amount of interest you can end up paying if you don’t pay it off every month!
Differentiating Between Needs vs. Wants
If your kids are like mine, they’ll tell you they NEED every Transformer they see on the shelves at Walmart. It’s important to start explaining needs and wants to your kids as soon as they have their own money or start asking you to buy things for them. A need is something you cannot survive without (food, clothing, shelter) and a want is something that’s nice to have. It’s ok to occasionally treat yourself and your kids, just make sure they understand that it’s a treat.
Saving for Emergencies
When you don’t have an emergency savings fund, you are forced to use credit or savings you had set aside for something else. Most financial gurus recommend having three-months of wages set aside in case something unexpected happens. It’s unlikely your kids will have an emergency that they will need to cover themselves but you can teach kids of any age about savings by encouraging them to keep a separate “savings” piggy bank they don’t touch.
Delaying Gratification and Setting Financial Goals
This is another way you can teach kids about saving. It’s especially good for those times they are asking for that really expensive toy. You can explain to them that you understand getting XYZ is important to them, and how good it will feel when they’ve saved all the money to buy it themselves. Then you can help them come up with a plan for saving for this extravagant item. It helps if you can practice this yourself so your kids can see goal setting and delayed gratification in action. Be sure and talk to them about it. Tell them what you’re saving towards, your plan to save for the item and how you’ll feel when you reach that goal and get to purchase your item.
If you have a significant other, it’s important to show your kids that you’re both on the same page when it comes to your financial values. Your kids may get mixed messages, for example, if you believe it’s important to save for emergencies and your significant other believes in spending every penny before the next payday. Think about what kind of example you want to set for your kids. Remember, they’re always watching you and looking to you for guidance, no matter how old they are!
Which financial values are important to you? Let us know!
Michelle Cornish is a Canadian CPA, helping moms find more time and money in their lives so they can start or grow their side-hustle, leave their 9-5 and spend tons of time with the people who matter most!! For more money management and business tips visit my blog here.