Dr. Rachell N. Anderson
Money doesn’t grow on trees but in Mississippi, trees and many things that grow on them are used to make money. These two concepts may help parents teach their children the difference between putting a hand out or requesting a job to get the money to get the things they want?
Long before most children can add or subtract, they are aware of money and the power it brings. They see how their parents use money to buy the things they want and they want some of that power. But, if left to their own devices, kids are likely to spend money like it grows on trees. So parents have a responsibility to teach kids about money, so they can meet their financial obligations now and learn to be good financial managers in their adult lives. It can make the difference between financial security and financial ruin.
Being a good role model helps but children learn better by doing. Once they learn how money works, children often become fiscal conservatives. When they figure out they can buy the things they want with money, many children begin to hoard every nickel they can get their hands on. That’s OK. It’s better to have it and not need it than to need it and not have it.
Here are the most important things parents need to teach their children about how to handle their money. It’s important to start early, before kindergarten.
1. How to create a spending plan.
2. How to pay bills.
3. How to save money.
4. How to reduce expenses to meet goals.
5. How to earn more money.
Children must be taught to contribute to the household (because they live there) without expecting pay,but extra jobs or projects, such as doing yard work, sweeping the garage, babysitting for the neighbors, washing people’s cars all work to line their pockets. Later, they can get a part-time job to pay for a car or any other big ticket item.
What’s a Parent to Do?
Give them control of money. When kids have control of money, they have many chances to practice until they get it right with a little guidance and empathy from parents.
An allowance is a good first step. Consider starting with a small amount as soon as your child is old enough to understand the connection between money and purchases.
1. Sit down with each child and come up with a figure for the allowance based on his of her financial commitments. There may be boy or girl scout dues, lunch money, hair cuts, church collection, whatever you two agree upon.
2. Give the child that amount plus a little extra to do with as he or she pleases. That money is not tied to chores, is not threatened by your dissatisfaction with his or her behavior.
3. Give the allowance on the same day of the week, each week; like you get your pay check.
4. Have a no borrowing clause.
5. Provide a way for kids to earn extra money to handle their additional wants.
6. Go with the child and open a savings account in his or her name. Discuss how to make deposits and collect interest.
Make it clear to children that they are in charge of their money and you will have no part in managing it or supplementing their loses. Translation: If they spent their money unwisely and don't have enough to meet their financial obligations, they’re out of luck. This is an important lesson to learn when financial obligations are small and easier to rectify.
Seeds planted early bear fruit later. They’ll learn better habits on their own, by doing, and with advise and counsel from you. Let children make mistakes and learn from the consequences. They’ll learn why those mistakes were actually mistakes and what it takes to rectify them.
The life-long benefits of teaching children good money habits are well worth the effort.
© Rachell N. Anderson, Psy. D. December 28, 2012
Dr. Rachell Anderson is a licensed Clinical Psychologist, a Professor Emeritus and author. She taught at the University of Illinois and ran a private Clinical in Springfield for more that 40 years. She lives in Tunica, Mississippi. Check out her website at WWW.drrachellanderson.com for more articles.