I have three young children and I worry about them on a daily basis.  Are they eating right?  How is school going?  Am I teaching them enough about the world?  Will they be ready once they’re out on their own?  We teach them about religious beliefs, moral values, and hope that they attain a level of education that lets them follow their dreams and aspirations.  Unfortunately, we rarely teach them about money.

Last I heard schools don’t teach much about money either.  They cover calculus, geometry, and algebra in spades but a general sense of budgeting and how to balance a cheque book are left up to the parents to teach.  Subjects taught at school have very little use in managing a budget, and realistically, when was the last time you used a quadratic equation anyway?

If you want your children to be as successful with their personal finances as they are with their professional lives you might want to take some time and pass along your budgeting techniques to them while there is still time.  Once they get out on their own and start forming their own habits, it could be very difficult to get them to listen to you, let alone take your advice to heart.

Saving

Teach your children that money doesn’t have to be spent right away.  There is nothing wrong with having a savings account and having something set aside for the future.  Some young people seem to think that any extra money in the account after bills are paid must be spent right away.  More people live paycheque to paycheque in Canada than ever before and it’s an unsettling thought.  What will they do if they run into a financial emergency like car repairs, medical expenses, or a job loss?  People who save have less exposure to economic events as they can afford to pay for the unexpected expenses that pop up from time to time.  Build a savings account and don’t use it unless you HAVE to.  You’ll sleep better at night knowing you have enough money to cover three months of bills to carry you though a financial setback.

Pay off your credit card each month

Ideally, cash is the what we should be using from day to day.  It keeps things simple and you really feel the weight of spending $250 in groceries when it comes from your pocket rather than a credit card.  Unfortunately, it is not very practical in today’s internet world to not have a credit card.  Teach your children that if they are going to use their credit card it must be paid off at the end of each month.  A good rule of thumb is if you are purchasing anything on your credit card that will be gone, used up, or broken by the time you pay it off you are not using the credit card wisely.  Buying gas on a credit card and taking four months to pay it off is not what the card was designed for.

Where does money come from?

You can find hundreds of conspiracy videos on YouTube about where money comes from and how it is valued but, for the purposes of teaching your children, all you have to explain is that you work for your money.  Eighty hours every two weeks of blood, sweat, and tears gives you the means to purchase food and pay for housing with maybe a little left over for a savings account or retirement investment.  Money is the direct result of working hard every day and being productive in the workplace.  I feel that this lesson is best taught practically.  Get the kids to cut the grass, shovel the driveway, do the dishes or laundry, take out the garbage – whatever jobs need to be done around the house, get them to do the work.  You want them to feel like they have earned the money and that it shouldn’t be spent recklessly or foolishly.  Teach them that skilled labour demands more money.  Schooling and experience can directly translate to a bigger paycheque at the end of the day.  This conversation might just turn into a lesson about staying in school too!

Live by example

The best way to teach your children anything is to lead by example.  If you exercise regularly and eat properly, they will learn to as well.  Want them to learn to manage their money and not spend recklessly?  You have to do the same thing.  Show them how much it costs to buy groceries or pay for utilities.  Whenever possible use cash so they can see the money leaving your wallet.  They’ll quickly learn how far a dollar will go and what things really cost.  Get them to make choices based on cost and budget.  You want a box of sugary cereal or a case of pop?  Well, then we won’t have money go to the movies on the weekend or get pizza on payday night.  Give them consequences.  Buying this will mean you can’t get that.

I my mind being wealthy doesn’t mean you have all the money in the world (or even just enough to retire!), it means you don’t have to rely on credit to get the things you need in life and a temporary financial setback doesn’t send you into a tail spin using credit just to get by.

What are some of the ways you teach your children about money?