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Begin by teaching the importance of setting goals for money. This ties into the earlier point of helping children get used to being decisive about money instead of passively spending money without purpose. Not every goal at this time in a child’s life has to be serious — every child is going to want something that doesn’t always serve a ‘serious’ purpose, like a trip out of town with friends, or a new video game system. Those goals are just as important as saving for college or buying their first car.
Buy them a big whiteboard for their room where they can write their short-term and long-term money goals. Being able to see it everyday will encourage them to continue to make sound financial decisions.
The final step is to let them put all the lessons into practice, without getting in the way. It is often tempting to step in when the child makes the wrong money decision, but it’s critical that you allow the mistakes to happen. When a child grows up and enters the real world, they will have to own up to their mistakes anyway, so ‘saving’ them from their mistakes will not accomplish anything. If they run out of money, don’t rush to refill their wallet just yet. Stop and continue the money discussion further by encouraging them to pursue other ideas for getting more money, or asking them to think over what they purchased with the money you gave them. Teaching children to beware of impulsive purchases will give them a solid foundation to lean on when they become adults.
Overall, each of the steps require complete honesty and transparency with your child in order to teach them how to budget and handle money properly. These steps are not overnight miracles, but will require continuous communication and trust to pull off. While money is a serious topic, don’t be afraid to show your child how proud of them you are for making solid steps to building sound financial practices. It truly is a lesson of a lifetime!
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