There’s been a lot of chitter-chatter about kids in my house lately. We don’t have any yet, but as we get nearer and nearer to moving back to the United States (after almost 3 years abroad) my baby fever is alive and well. Seriously, hold me back, people.
My husband and I have had a lot of discussions about how we want to raise our future kids, from the type of people we hope they’ll become to the names we think we love best. Of course, being a personal finance blogger, I’m also very focused on raising financially literate children who understand the value and the importance of money. Below are the main lessons I hope they will learn from us:
1. Making Money Takes Hard Work
I don’t want my children to ever think anything will be handed to them. Whether it’s earning a medal at a track meet or getting an A on a test, I want them to understand that nothing worthwhile comes easy. Being successful professionally and personally requires an immense amount of hard work. They’ll hopefully garner some lessons from watching both of their parents work hard, but I definitely want to do more than just lead by example. They won’t have the luxury of a trust fund, but they will hopefully gain enough tools to become self sufficient members of society. Hard Work = Money. Laziness doesn’t. Maybe I should just make that into a bumper sticker?
2. The Definition of Debt
When I was a kid, I don’t think I really understood what “being in debt” meant. I want my children to know that debt means owing someone else money and that the more money you owe someone else, the less freedom you have to do what you want. If they have to take out a loan for their education or to buy a house or car, I want them to be knowledgeable enough to crunch numbers and understand how much they have to pay every month. When I took out student loans, I felt like I just did it blindly. I don’t want them to make the same mistakes I did.
3. Save Before You Buy
I know there’s going to come a time when my kids will want a toy, perhaps an expensive lego set or a remote control helicopter. I’d love to figure out a way to teach them how to save up their birthday money and Christmas money to buy such a toy in a way that’s fun and engaging. Perhaps I can convince them to forgo the toy altogether and invest the money instead, showing them just how many “toys” they can buy in the future if they give their money a chance to grow.
4. Be Giving
The last financial lesson I hope they’ll learn is to be giving. I don’t want them to blindly hand over their allowance to a local animal shelter. Rather, I’d like to take them to one, have them ask what types of supplies the shelter needs, and then give some of their money and time to help make it happen.
I know that we have a long way to go before we get to see some of these dreams put to action, but it sure is fun to think about.
How did you teach your kids to be financially literate? Any tips for those of us who aren’t there yet?
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Great tips Cat! These are what the wifey and I are doing now along with letting them know that you can actually work smarter not harder. There are a lot of jobs out there where you spend long hours doing hard labor and you get paid a lot less the other jobs. We are also teaching them about credit vs spending money you actually have.
With kids they want to spend so we have them give 10% save 10% and split the rest in half. This so that maybe they buy something now and use the other half for something later one. The one tip is being patient with them they are kids after all. And make sure you are practicing what you are preaching to them. They learn a lot from watching and seeing and if you say one thing and are doing another it will bite you in the butt.
Ahh hopefully I can learn to work smarter and not harder by the time they get here so I can teach them that too!!
You certainly have your priorities right if you are starting with this list to raise your kids! The only thing I might add is to encourage them to learn something new everyday so they can increase their skills so their earning power is as high as possible. This will open a lot of doors. By the way, don’t hesitate to have kids. They are lot of work, but well worth it!
Awww thanks! I’m definitely ready to go! ;)
great principles. I want to teach them independence, that nothing falls off the sky and that once you are on your own you need to take care of yourself. I am over 30 and still have friends asking their parents for money every month like teenagers…
Ha yeah if I ask my parents for money, you can bet I am having a huuuuge emergency.
Great tips Cat! This is something we’re giving even more thought to these days with our oldest being 5. I think it’s not only the loving thing to do, but I also think we have a duty as parents to raise financially literate children. Great post!
Thanks! I think it’s our duty too!
Cat, you guys are right on track with your thinking – great job! One of the reasons we give our kids allowance (for work, as in a paycheck, not just for nothing) is so that they can learn to manage income. We have them save 10% and give 10%, like Thomas mentioned, and then the other 80% is theirs to manage as they please. They use it to buy those things that they want, as in our house, we only give them “stuff” on birthdays and Christmas. It’s taught them to learn that life doesn’t offer an endless pit of money, and that they’ve got to choose wisely in how they spend. We’re hoping that by implementing this tactic, and the others you mentioned above, that they will avoid the troubles of debt that we’ve gotten ourselves into.
I love this idea and I also like the idea of only giving them stuff on birthdays and Christmas and maybe when they do something awesome or get a good grade too. I seem to remember my mom giving us beanie babies when she heard we did something good or were polite etc.
All of these are definitely important lessons. I think you’re spot on. I think the important theme running through all of these is that you need to give your kids experience making different kind of decisions with money, so that they can understand how the process works and what the consequences of those decisions are. You don’t want them to get their first crack at decision-making out in the real world when it really matters. It’s awesome that you guys are thinking of this stuff early.
Thanks!! I’m a super planner in that way haha.
This is great advice, Cat! I will want to teach our kids very similar lessons. It’s important for all kids to know where money comes from (work) and that they know how to spend, save, and give properly. As long as they understand all of those, they will probably end up pretty well off.
CommonCentsWealth I definitely hope so!
All excellent points Cat. I’m sure you will do very well with your kids and teaching them about finances. I remember as a kid that 90% of any birthday or Christmas gift money I received had to go into my bank account. And if I wanted to buy Christmas gifts for the rest of my family I had to save that money in my piggy bank throughout the year from any cash I earned.
TacklingOurDebt Thanks! It sounds like your parents did a great job!
These are all things that I want to teach my son. They are all really important lessons that really everyone needs to know.
DebtRoundUp I couldn’t agree more. :)
These are great! I definitely want to teach my daughter all of these things too. Right now all she knows about money is that you put quarters in candy machines and they give you candy, and that we get mad at her when she puts it in her mouth. :)
ayoungpro Hahaha that made me laugh! :)
I think those are all good ideas. I’m trying to use all of those. It’s funny, you think it goes in one ear and out the other until you see something work at the most bizarre time. I guess if you walk the walk, it does sink in there somewhere.
Eyesonthedollar Haha, that’s good to know!
Great ideas, Cat. My parents required my sister and I go 50% on toys we wanted. It taught me how to curb impulse spending around age 7. Everything I know about money today is a tribute to both my parents taking a hard stance about teaching us instead of just handing over toys or paying for college in full. Teaching me about money, even with some tough love lessons, is one of the best things my parents did for me. That and being generally awesome and super loving of course.
BrokeMillennial That’s pretty cool. I am making a mental note of all of these great tips for sure!
You sound like you’re on the right track!
Beachbudget Fingers crossed!
Well, I think my love for raising financially literate children is well documented (LOL!) so you know that I love you’re thinking ahead and planning on teaching your kids about money. You are definitely on the right track. We set family save, spend and share goals and the girls create their own save, spend and share goals too. These goals frame-up so many of money conversations and it really helps them understand that handling money is about choices. One of the the hardest things to do – is let them make money mistakes when they are young. But I’d rather wipe away my 6 year old’s tears over the $50 she worked so hard to earn and than foolishly spent on toy that she thought she wanted but really didn’t than wipe away her tears when she is 25 and it’s a $5000 mistake. You’ll be a great Mom some day … soon!
TheHeavyPurse Aw thanks, Shannon! That’s really sweet of you to say!
No kids yet, but when we do have kids we’ll want them to be smart savers and big givers. I think my parents did a decent job of teaching us about money (they did great teaching to work hard and save, but didn’t really know a lot about investing-that’s something I picked up on my own as I go older).
StudentDebtSurvivor I’m sure your future kids will be awesome savers and investors, KK!