If you have kids, you likely worry more about them than you worry about yourself.How do you make sure they don’t fall in the same financial traps you fell into?
I know how you feel.I have 3 kids. The oldest is 22. The middle one is 19 and my youngest is 11. I worry about them.
I was fortunate enough not to have made huge financial blunders growing up – I didn’t have any money to be stupid with. I never had to worry about getting out of credit card debt. I didn’t even have a credit card until I got married.
Because I was so broke growing up I was super careful and never spent money I didn’t have.Fortunately, my kids haven’t grown up under the same circumstances.
That’s why I worry.
They really don’t know how hard it is to make money. And they don’t know what it’s like to go without.I want to make sure they don’t fall into the traps other people do.
The question is how? Here’s the approach I’ve taken so far:
I’ve told my children about my experiences growing up and I think that’s helped. I’m also lucky to be in the business. I talk about how to spot and avoid scams.
But it’s been more important to tell them about our situation in real-time. When my business suffered in 2008 I told them what was happening and what it meant to us as a family.
Of course I tried to put it in perspective. I explained that we weren’t going to be homeless and we weren’t going to go hungry, but when things got lean, we had to scale down.
I later learned that by doing so I did them a favor.
They already knew there were problems. By talking about it, they were able to reduce their anxiety. Things weren’t as bad as they’d imagine.
2. Stay Calm
Kids think of money like you and I think of water. You go to a faucet. You turn it. Water comes out. It’s a no-brainer.
For kids, we are they faucet. They don’t understand how we earn money and what it takes. I can’t expect my kids to really “get “ that until they experience it for themselves. With young kids, I have to remember they have limited experiences and just can’t really understand it fully. That’s why I encourage them to work as soon as they can. With or without a college degree, any job can be a great job.
3. Encourage them to love spending money.
You probably think I’m nuts…but give me a chance to explain.
Too often, kids think of saving as the opposite of spending. Not so. You can either spend money now or have more money to spend in the future. You can either spend money on something you don’t value or wait and spend money on something that’s truly important. Frame it that way and you’ll see your kids embrace a new attitude towards current wasteful spending.
Once kids understand that money ain’t like water, this concept will be clear. They’ll understand that money is a limited resource and must be spent wisely.
4. Put them on a budget
Give them a fixed amount and let them do with the money as they sit fit. Advise them often, but let them make their own decisions and accept the consequences. When they blow it, don’t bail them out.
If the kids are in college, divide up the support you send into 12-monthly installments. Don’t pay for tuition, room or board. Add it all up, divide it by 12 and put that amount in their accounts each month. Let them learn how to work within a fixed income.
If you can, let the kids work for their money. Even if they are full-time students, they can find things they can do to earn money. Encourage them to be resourceful. They can even use Craigslist to find jobs. The bottom line is to give them as much experience as possible in handling their own affairs and refusing to bail them out.
What have you done to raise money smart children?