Guiding Principles For Raising Money Smart Children



"One thorn of experience is worth a whole wilderness of warning." - James Russell Lowell

Rather than seeing these ideas as "rules",  it might be helpful to think of them as principles when it comes to helping your kids see money rightly.

And yes ... some of these may be difficult (the first ones, in particular, if they represent a shift for you), but after seeing many families do this well, these are some of the best things you can do with your children when it comes to financial education.

1. Talk openly about money.
Parents make a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.

2. Talk factually about money.
Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing up to make sound financial decisions

3. Require chores; pay for optional work.
Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.

4. Provide children an allowance they can make real choices with.
Talking about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.

5. Help children comparison-shop.
Help them consider issues such as cost, quality, and convenience. Every choice in life involves trade-offs, right?

6. Require children to wait before making large purchases.
Adults should wait at least a month whenever they are making a large purchase. Children shouldn't be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week's allowance). There is always tomorrow, and over half the time they won't remember what attracted them to the desired item in the first place. Developing this habit will help make them resistant to impulse buying.

7. Don't use money as a punishment.
Your priority should be helping to give your values to your children, not buying their outward behavior.

8. Don't loan your children money!
If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are, "If they want it, they have to save for it. If you want them to have it, you will buy it for them." Loaning your children money for items they want teaches them they aren't responsible and don't have to prioritize.

Some may disagree with all of these admonitions -- I don't intend to become a "parenting guru" in my spare time -- but I do hope that, at minimum, this will help you be thinking about how your wishes get passed down.

Also, make sure they know that you don't have to overpay in taxes. There are legal and ethical ways to keep as much of your money as possible out of Uncle Sam's pockets. 

We're in your corner.

BE THE ROAR not the echo®


Janet Behm
Utah Real Estate Accountants

(801) 278-2700


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