Instilling Sound Money Habits in Your Kids - You Need to Walk the Talk
By the time your kids run off to college, they will have developed most of the money habits they will carry into adulthood. If that’s a scary thought for you as a parent, then you need to take a closer look at your own money habits because that’s where your kids will get theirs. Studies have shown that most kids learn their money habits from their parents. You can tell them all they need to know about sound money management; but, kids are more likely to follow your actions and not your words. If you are frugal and make a point to compare prices to get the best deal, your child will likely follow suit. If you spend freely without regard to cost, there’s a high probability your kids will do the same. Kids who receive an allowance irrespective of the work they do to earn it, will feel entitled, while kids who understand the relationship between work and reward will have a greater appreciation for the value of money.
The critical period for developing sound money habits is the time between your kid’s first real interest in money (when he wants to buy the latest X Box game) and the time he’s preparing to go off to college. Every money moment in between is an opportunity to instill good habits. You can tell them what they need to do; but, you also need to walk the talk. Here are some examples of how your kids can develop good money habits:
- Before making a large purchase, take your kids through the process of comparison shopping, which can be done online. Discuss a spending target for the item, and, if you can’t find it at your desired price, tell them you plan to wait until is on sale again.
- When the family wants a new TV or anything the whole family will enjoy, discuss the cost with your kids, and then set a goal for saving for the item. Avoid buying items on credit. Let your kids in on the process of waiting until you can pay for with cash.
- Avoid using credit cards when making purchases with your child at the store. Credit cards offer no transparency into the concept of money. If your kids see you carefully counting your cash at the checkout, they gain a better understanding of the cost of things.
- When your kids begin to earn money from an allowance or a job, take them to the bank to open a savings account. Show them how saving just 10 percent of their money can add up over time. Set some savings goals and review their savings progress regularly. As an incentive you can offer to match a portion of their savings when they reach certain milestones.