Raising Money-Wise Kids

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Parents call my radio show all the time and say, "Dave, my teenager thinks money grows on trees. What do I do?" "Dave, we're still supporting our 25 year old son, what do we do?" "Dave, how do I teach my kids about money?" Read on; I'll show you.

First, remember your children are watching you. When my oldest child was in preschool the brave (or crazy) teacher put her little feet in paint and then put the footprints on some matting. Under those precious prints she wrote, "I'm following in your footsteps." I kept that little plaque on my desk for years to remind me that they are watching.

There is a Native American saying: "Tell me, and I'll forget. Show me, and I may not remember. Involve me, and I'll understand." Our children are going to model our handling of money. The most important thing we, as parents, can do is to make wise decisions ourselves and show our children what we are doing and why we are doing it. Jump Start says that 94 percent of children learn their money management skills from their parents.

Second, teach them intentionally. There are four main areas of money that children need to learn: working, saving, spending, and giving. Each of these areas is handled differently for different age categories. Let's look at them generally for just a moment.

Working is how money is made. There has to be an emotional and intellectual connection between work and money. I meet fifty-year-olds who have never made this connection. Because this connection needs to be made, never use the word "allowance." Instead, pay "commissions." Life will not make "allowance" for you, but it will pay you what you earn. Work, get paid; don't work, don't get paid. Work, eat; don't work, don't eat.

Saving is how you control some of your circumstances and how you can buy big purchases since you don't want to teach your children to borrow money (if you don't know why that is, pick up one of my books or listen to my radio show). Goal-setting is very important when you are saving. Try making a game out of saving to buy something and wealth building. Simply divide the price of the goal by the amount you plan to save each week and see how many weeks or months it takes to ring the bell.

Spending happens differently when you are spending money that you earned. Your teenager will think seriously about their evenings out when they have to earn the $20 for dinner and a movie. Spending is also one of the rewards of working and disciplined saving; it can be the celebration of a goal reached. When spending occurs in this way, the child's self-esteem is maximized; he did it on his own.

Giving is precious to watch when the kids are young, and fulfilling to watch as they grow into adulthood. Giving makes them less self-centered. Giving brings your kids depth of character. Those who never give become shallow, self-centered and miserable adults. Givers are better spouses, better employees, better people.

When I suggested that kids work to earn commissions, some of you with small children raised an eyebrow. I am not talking about a Hitler's boot camp for money. Those of us who have had little ones know the definition of cleaning the room for a three year old: the parents do everything except the one or two toys the child actually puts in the toy box, but the child gets all the credit for cleaning the room. Give them small chores with which you assist, then give them all the credit.

For three to six year-olds, pay the commission on the spot. Children need to have instant "atta boys" and money for work. This allows them to make the emotional connection between work and money. They will be more willing to do the chore next time.

Likewise, the savings goals should be short-term. When a child saves for a Prince and the Pauper Barbie and buys it with their own money, there is a sense of pride that will make them smile a lot more than if you simply bought it for them. When children are young, put their money in a clear container. This helps them visually register the savings increasing and the spending decreasing their balance.