Parents are faced with tough challenges each day when it comes to their children. Every day can present multiple issues which need to be dealt with, and as the children grow older, the more complex those issues become.
What is never in doubt is the desire of parents to set the right foundation for their children, so as their children continue to grow older, they have the right basis to make strong and educated decisions in any situation. One area that seems to be lacking overall within most of the parent/child dynamics is when it comes to finances.
As we said earlier, due to the complexity and various issues parents typically deal with on a day in and day out basis, they tend to take the easiest road possible when coming up with a solution. For some areas of life, this works out well.
However, when it comes to finances, this is an area which cannot be just soothed over with kind words, or a listening ear. It also should not be dismissed, as finances are something a child will need to deal with every day of their adult life.
What are some ways you can help your child grow in the area of finances, both in the short term, as well as for the long term? Here are different ideas for you to ponder.
Be Open and Honest About Your Finances
We understand there might be some reservation about this solution, as most people want to keep their finances a secret, not wanting friends and family to know how much they make. In all honesty, most of us were brought up with the idea that sharing our finances is considered impolite, not meant for the dinner table.
Telling our children how much we make is considered even worse, why would they need to know? And while you need to make sure your child is mature enough to understand the information you are giving them, it’s equally important to impart on them the knowledge of your finances.
Once you have determined they are ready to understand, you need to share as much information with them as possible. How do you create your monthly budget? How much do things they may take for granted cost (Internet, Power, Water, etc.)? How much do you allocate for going out for dinner? How do you save up for the vacation you take each year?
Most children have no idea how much things really cost, unless it effects them, so showing them how much money it takes to cover your bills each month, plus what you put into savings, will start them on the right path towards financial knowledge.
When A Child Asks For Something, Don’t Just Tell Them Yes or No
This is a very easy trap for parents to fall into. You are standing in a store, and your child is constantly asking you for a toy located by the cash register. In order to get them to be quiet you either tell them yes while giving them a look, or yell at them and tell them no. However, we would like to present a third option – you can use this as a learning opportunity.
You can ask your child if they know how much the toy they want costs. If they don’t know, have them find out. Once they realize the price, ask them if they currently have the money to pay for it. If they do not, then you can tell them certain ways for them to earn money in order to pay for it. And if they are given an allowance, or given money for various chores, ask them how much week’s worth of allowance it would cost to afford the toy they desire.
The last thing parents want to do is enable their children into thinking they can have you get them whatever they want, whenever they want. Once your child is of the right age (typically between 5-7 years old), you can have them start earning their own money, and then it will be up to them how to spend their money.
Set Up a Commission Chart For Your Children
Speaking of children earning their own money, you will typically hear children talk about receiving an allowance from their parents. The word allowance in itself means “giving someone a sum of money on a regular basis”. The word giving is a term you want to get away from as a parent when it comes to finances. Once again, you don’t want to enable your children into thinking they should get something from you for doing nothing when it comes to finances. You want your children to earn the money they are receiving.
In order to foster this idea, one idea is you can set up a chart, and have different tasks that are available each week. Next to each task, you can put an amount of money (or a commission) each task is worth. If your child or children want the commission, they have to perform the task. This way, if they complain about not having any money, you can take them back to this chart, and show them that it’s their choice on whether or not they have any money on any given week.
As a bonus, if your child is saving up for something, and they come to you asking for more tasks, make sure to have a couple of extra tasks up your sleeve, allowing your kids to earn more if necessary.
In addition to all of this, you can teach them negotiation skills by having them tell you what they think those bonus tasks are worth, until you come to an agreeable commission price.
With so many complex issues being dealt with on a daily basis between a parent and child, finances is one that’s very rarely front and center. However, the more time you spend with you children discussing and explaining your own finances, and working with them to create a positive mindset when it comes to money, it will pay dividends towards setting the right foundation for their long-term financial success.