“If you give a hungry man a fish, you feed him for a day, but if you teach him how to fish, you feed him for a lifetime.“ – Lao Tzu
When I think about what is required for financial success and how I can teach that to my kids, my head starts swimming. There really isn’t very much in my control when they leave home; however, I can do a few things early that will ensure my children have the right foundation.
Because three-fourths of Americans are living paycheck to paycheck. Student loan debt is at crisis levels. Credit card debt is a staple in nearly every home.
Advertisers are going to invest as much time and resources as possible to convince my kids that they need to buy their stuff. I need to spend as much time and resources as possible to ensure they know how to think for themselves and make wise decisions.
I can’t make financial success happen for them, but I can guide my kids toward that path. Here are five ways you can get started, too.
5 Ways to Set Your Kids Up for Financial Success
When should you start talking to your children about money? Since it’s a subject that is intertwined with other important topics like hard work, responsibility, gratitude, and patience, you can start the conversation as soon as you like. I began teaching my oldest to complete a set list of chores for payment when she was three. That was the suggestion from Rachel Cruze, author of “Smart Money, Smart Kids” which is an excellent follow-up read to this article.
Even before you crack open a financial book or hire some financial tutor, try out a few of these conversation starters and see how they impact your child’s understanding of money.
Like I said before, creating an open-door policy for the topic of money throughout your child’s preadolescent life will enable you to have ongoing lessons with them, often with real life examples. They can ask their questions in a safe and teachable environment which will help them learn to think for themselves.
2. Create teachable moments.
Now that you’re open to talking about money, it’s time to dial up your involvement a few notches. When my husband hung up our Christmas stockings shortly after Thanksgiving, my daughter asked if we could start filling them with presents. I told her we didn’t have any presents yet and she burst into tears.
That became a teachable moment for her to understand that Christmas isn’t all about money, and traditions like decorating our home bring joy, too. Also, we discussed the importance of saving up for the things we want and making sure we stay within our Christmas budget.
3. Help them learn from your past mistakes.
When I was a teenager earning minimum wage, I accidentally left my wallet on a check-out kiosk at the grocery store. It had $80 cash inside – which was a massive amount of money for me. By the time I pulled my car around and ran back inside, I found my wallet, but the cash inside was gone.
Being robbed like that gave me a feeling deep in my gut that I’ll never forget.
It helped me become more responsible with my finances in two ways:
- I learned to keep track of my wallet, purse, ID, keys, cash, etc., more thoroughly.
- I never forgot that feeling of emptiness and anger after someone stole from me. Part of the blame, though, was mine for leaving the wallet behind. Once the money was gone, it was GONE. I try to remember that when I’m tempted to “throw money away” on something frivolous or irresponsible. Once I spend it, it’s gone for good.
What are some past financial mistakes you could relay to your children? You don’t have to tell them everything, but if you want to set them up for financial success, helping them understand what not to do can be a powerful method.
4. Practice the word “No.”
Life is very different than in our grandparents’ day. Entitlement is rampant in our nation. Everything is within arm’s reach. You can swipe your finger over a screen and boxes show up on your doorstep. You can buy a computer, a car or even a house with no money saved up. It’s easier than ever to make it in this world; and yet, it’s harder than ever to make it in this world.
Can you see the paradox, too?
I believe it is our job as parents to coach our kids on things like saving up, spending wisely, and waiting. That’s where the word “No” comes into play. You’ve already had a lot of practice with that word if you have a child. When you say no to their request to jam a screwdriver into a light socket, it’s because you love them.
Similarly, if you say “No” to their request for you to buy them a toy every time you’re there for food, it’s your prerogative to speak “No” out of love. Splurging is different, but make it the exception; otherwise, they’ll start thinking it’s what they deserve all the time.
5. Lead by example.
Can I just admit…this is the hardest one? ::sigh:: I just want stuff, you know? But, if I really want my kids to understand the road to financial success isn’t paved with busted budgets and credit card debt, then I must strive to make those a thing of the past.
Think back to your own parents’ spending habits. Did they have an impact on you? My guess would be yes.
So it will be with your kids.
While you’re leading by example and conversing and guiding your kids, you can also give them a leg up by saving money for them. A 529 plan is a great way to save money for their college tuition. Or perhaps you can open their first savings account and help them decide when to go and how much to deposit. These lessons, too, are great pieces of the foundation to your child’s path to financial success.