Let me start by telling on myself. There was a time, in the not-too-distant past, that I was pretty lazy in teaching my kids about personal finances. I am doubly embarrassed about that admission because my job, the way in which I provide for my family, is all about helping people manage their finances. If anyone should have the motivation and wherewithal to educate their children on managing money, it should be me. Right?!
Then, I realized that there are only 5 essential lessons that our children need to learn to be efficient money managers. And the best part is, at least 3 of them can be taught without the condition of money!
1) Define RICH for your child as having BREATHING ROOM in their finances (spend less than income). Help them to understand that Standard of Living does not equal Quality of Life.
2) Talk with your child about Opportunity Cost. While most kids make their choices based on what makes them happy in the moment, help them understand that knowing the cost of the choice not taken is essential to wiser decisions.
3) Reinforce budgeting through time planning. If you’re traveling somewhere as a family and need to be out the door by a certain time, walk your child through the exercise of identifying important tasks (eat breakfast, brush teeth, make bed, get dressed) that must be accomplished and how long each takes in order to backwards plan a successful start time to getting ready.
4) Help them understand debt by fostering a healthy appreciation that “I want” is often better than “I owe”.
5) Finally, prepare them for their future family by having them communicate with and consider others as part of the process for budgeting and spending money now.
Focus on those 5 lessons and you will set your children up for success. Good luck!
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