So much of the emphasis in today’s world regarding kids and education seems to be focused on “intelligent” learning, such as technology, foreign language, etc., however it’s vitally important that you teach your kids about money in a real and tangible way before they graduate from high school. A college degree is a great thing, but too many kids these days head out into the adult world of life being a pro in their chosen field, yet not having any idea how to manage their new-found earnings. With most schools not teaching much in the area of personal finance and money management, it’s up to parents these days to prepare their children for life in the real world, where bills have to be paid and retirement has to be planned for. Here are four things you’ll want to make sure your child knows about money before he or she heads out into the world of adulthood.
1. What a Budget is and How to Use it
As a part of our oldest daughter’s 10th grade curriculum (we home school), she’ll be responsible for (with our supervision) managing our family’s finances, paying the bills and determining how much we can spend on groceries, entertainment and the like. While this may seem like a heavy burden for a 16-year-old, we think of it as wise planning. After all, someday she’ll be out on her own, having her own household budget to manage. We don’t want her to be intimidated by the thought of managing larger amounts of cash, and by allowing her to manage our family’s income and expenses for a year, we’re hoping to help her become more comfortable with all aspects of money management, budget planning and spend-tracking.
2. The Importance of Living Below Your Means
I say “below your means” instead of “within your means” because I know too many people that, although they aren’t in debt, they have absolutely no savings or retirement, but instead, spend all that they make. This is almost as dangerous a lifestyle as one with loads of debt, so we are teaching our kids to make sure and live below their means, having money each month to put toward savings and retirement.
3. The Importance of Making Saving Money a Habit
When our kids earn money, the rule is that, off the top, 10% goes into savings and 10% goes into a giving fund, to be given to the person/charity of their choice. We’ve set this rule so that our kids get into the habit of automatically thinking about the money that comes into their hands, how much of it they can save, and to whom they can bless with an act of charity. This makes their money not be all about them and helps them to see that money has a purpose other than to be spent solely on today’s wants.
4. The Deception of Keeping up with the Joneses and the YOLO Lifestyle
If there’s one thing our kids have learned from our journey to be free of debt, it’s to not make money management decisions based on what others think, and to have a plan for their money, refusing to succumb to the “you only live once so you might as well have fun” lifestyle. By teaching your kids the concept of value-based, intentional spending as opposed to mindless, live-in-the-moment spending, you’re helping them learn to separate their money from their emotions and to learn to use their money in the ways that’s most important to them.
Teaching your kids about money and how to manage it wisely is likely one of the most valuable gifts you can give them, as it will help them to understand the importance of learning the true purpose of money, and will teach them to be a steward of their money as opposed to a servant to it.
What do you think is important to teach kids about money? What is the most valuable lesson you learned about money as a child?