Easy Tips for Teaching Your Children Personal Finance

Me: [On a fresh summer day] Good morning, Mum.

Mum: Consider a ship sailing gently in the vast blue ocean. If all the water were to dry up, the ship would stop sailing. If there were a flood or rough storm, the ship might get damaged and sink. In life, you’re the ship and money is the water.

Me: Can you please make me pancakes for breakfast?

Mum: This is the relationship between money and happiness, dear. You need a certain amount of money to be happy, but greed will lead to thoughtless consumerism and lack of appreciation for what you have, and they are your enemies.

Me: How about you drizzle some honey over them? Thanks.

This story is partially true – not because my mum didn’t share this analogy with me, but because I dislike honey – a lot.  She heard this bit of wisdom on the not-so-idiotic box.
My mum and dad not only told me how to spend and save wisely, but also showed me. As role models, parents can do plenty to set their children on the path to financial independence and spiritual well-being. In most cases, children will follow that path, because they are born mimics, and as they grow up, their first frame of references are their parents.
Here are some tried and tested ideas you can add to your family’s culture to improve financial discipline of the entire household.
1. Record and Compare.  Each member of the family should record all incomes and expenses, dividing them up in terms of groceries, entertainment, gardening material, food, stationary, gifts, etc. With the intent of empowering each grown-up and kid to control spending habits, sit together to compare notes and trends over the last few months.
Encourage thrift and gently advise against wasteful spending on entertainment and often-expensive-and-always unhealthy junk food.
Avoid saying: ‘You wasted all your money watching movies, dear. I’ll have to disown you after cutting your allowance.’
Instead, consider saying: ‘It seems we spent a lot at the cinema last month. Let’s give it a break for a while and see some movies at home instead.’
2. Saving And Giving To Charity.  Set targets for saving and donating small portions of household income and pocket money. Even if you can afford to buy expensive gadgets, toys and furniture right away, consider saving up for them because delayed gratification can help improve self-restraint.

Share with your children any information about donations made to NGOs, free health clinics, or shelters for the homeless, and keep pointing out the merits of giving to charity.

Avoid saying: ‘We don’t have enough money to buy you designer sneakers, dear. Do shut up.’

Consider saying: ‘We sure are lucky to be in a position of ‘giving’ charity instead of ‘accepting’ charity.’

Or say”  ‘You’re shoes are a little worn out but there’s nothing wrong with them otherwise. We’ll get a new pair after a few months, and donate yours to the homeless shelter because someone could probably use them for another year or two’.

3. Don’t Shop Till You Drop.  Impulsive buyers often shop without a list and end up over-spending. Make monthly shopping lists for ‘mum & dad’ and ‘kids’ (include groceries, junk food, candy, drinks, fashion accessories, room decorations, etc.) and take your children to the store to give them an idea of how the household is budgeted.

With the sole intent of window shopping, visit toy stores with your children and let them browse the collection to their hearts content. Any requests for purchases should be met with gentle yet firm reminders about the purpose of the visit.

Avoid saying: ‘Will your wish list ever end? I can’t afford to keep you in my house anymore. Good bye!’

Consider saying: ‘We’re just here to have a look around. You have plenty of toys waiting to play with you at home.’

4. Spiritual Guidance.  Use references from your religion to teach your family about thrift and wasteful extravagance. All belief systems praise humility, hard work and gratitude for one’s assets, regardless of their shortage or abundance – correct me if I’m wrong – because these qualities are related to spiritual success. And as artless as it sounds, our life’s aim is to be happy.

5. Penny-Wise and Not Pound-Foolish Either.  We all compare prices for products and services we buy – it’s natural to want to get a good discount. But we often forget to encourage our children to do the same. While at the mall, give your children a budget and allow them to buy anything, as long as it fits within the range.

Avoid saying: ‘Why do you always pick the priciest item? Even you’re not worth that much!’

Consider saying: ‘I think this teddy bear cost a few dollars less at that other store. You could use that money for something else or give it to the homeless man we saw earlier; he’ll be really happy.’

Or say: ‘I’m sorry dear, you’ll have to put back one item because you’re spending more than what you have. Maybe buy it next time.’

And make sure you follow the same principle when shopping for personal items. Communicate with your children about your buying decisions and sacrifices.

If you didn’t buy something you liked, tell them, ‘That green bracelet sure was pretty but I’ll wait a few months for the price to come down. It’s just not sensible to spend that much on a bracelet.’

It’s easy to see that empathetic communication must accompany leading by example. Eventually, you will direct your children away from ungracious indulgence and towards prudent buying behavior, and while that won’t guarantee your kids a great life, it will go a long way to achieve that end.

Fehmeen blogs at Management Mafia, where she writes articles about different management topics with a touch of humor. You could follow her on Twitter, but you don’t really have to because all her work on business and home management is on her site!

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