Let's face it: The world ain't what it used to be. During our parents' prime, people moved out at 18 and were able to find jobs right out of college with little to no struggle. They quickly built a life for themselves and were eager to push us out of the nests and find our wings. Our children, however, are growing up in a very different time. No longer can someone simply work a part-time job and pay for their college tuition. In fact, American students have now amassed a combined total of $1.3 trillion dollars in debt. The average college grad today owes $35,000 to the government for their degree, though most bachelor's will land an entry-level job that pays $12-14 before taxes. It's vital that our children learn the importance of fiscal responsibility early in life, and we're here to help make your job as an instructor a bit easier with three major rules to follow when teaching your kids about money.
Rule #1: Be Honest about Your Financial Situation
As a parent, it's your job to provide as best as you possibly can. This means that you take extra shifts or even work an entire second job to make sure your kids always have new shoes and school supplies, presents under the tree at Christmas time and gifts on their birthday. But unfortunately, so many parents' struggle is hidden from their children. This means that when a major financial hardship strikes like a medical bill or car accident, they aren't able to understand why there's less food in the fridge and the family doesn't go out to the movies on the weekend.
Talk to your kids about money. It doesn't have to be taboo. In fact, the more open you are about your finances and the challenges you face, the more relatable you'll be. There's no need to talk about every specific charge that's given you massive credit card debt, but don't hesitate to tell your kids how expensive the world is. Tell them why they should care about how much something costs and the value of a dollar.
Rule #2: Want vs. Need
Everyone needs to indulge themselves once and a while, but kids, in particular, can get in the habit of "needing" all the latest toys, video games and electronics. Have a discussion about their favorite things and compare them to life's essentials. Help them understand the difference between wanting something and needing it. When you go to the store together, have them point out things that they want and teach them to reason whether or not it's a worthy investment. Ask questions like, "Do you already have something like this?" and "How often do you think you'll use this?"
The most important lesson to instil through this exercise is the ability to discern between what's worth buying and what's not, and having strong enough willpower to pass up on something we want but know we won't really utilize to its full potential.
Rule #3: Give Them Responsibility
Kids will never learn how to actually spend money wisely if they aren't given the opportunity until they're making their own at a job. As a teenager, most of your money probably went to movie tickets and fast food. Our kids, on the other hand, need to learn the importance of consistently building up a savings account. This money isn't to be spent on a mega-vacation or ultra-luxurious TV down the line but instead provides them with a security that they will always be able to take care of themselves and their family, especially in the event of an unexpected emergency like the loss of a job.
Start by offering a small allowance for household chores. Teach them to use portions of the allowance for essentials like school supplies. They will learn that taking care of the most important things first is what matters most. It's not unlike insuring your car, paying your mortgage or rent and taking care of your cell phone bill as soon as it comes in the mail. When it comes to budgeting, the key to success is to proactively prioritize.
Making Money Work for Your Family
Finances will always play a major role in our lives, but teaching our kids how to save money and manage their finances wisely from a young age will ensure that their own lives aren't dominated by their bank accounts. It's not always easy to be open about our financial struggles, but we should always strive to teach our children from both our triumphs and our shortcomings. Instead of seeing your lack of funds as a failure, view it as an opportunity to assess your own budget and an inspiration to put some of the skills you want to teach your kids into practice.
You'll always be the most influential figure in your child's life, so teaching them about money will crossover into other aspects of their lives that they will undoubtedly rely on as they grow.