Financial Answers

“By Elisabeth Donati”

Parents are often at a loss when it comes to teaching their kids about money: “Is there anything I can do to make sure my kids don’t need to move home because they’ve messed up their lives financially?” In other words, parents are looking for ways to make sure their kids grow into financially responsible adults.

I’m happy to report that, Yes…there are three things you can do to practically guarantee that your adult children won’t ever need to move home in order to get back on their feet.

First, imagine this scenario…

Your son (or daughter) comes to you one day and says, “Mom, I have decided I want to be a professional golfer.” You say, “Wow, that’s cool. That’s going to take a lot of dedication and practice but I’m excited for you.”

Your child asks, “So, would you get me a set of clubs so I can learn how to hit the balls?” You say, “Maybe later.” He says, “Well, will you take me for some lessons then?” You respond, “I don’t really have the time.” He’s frustrated at this point and asks, “Will you at least help me learn the rules?” You say, “No, you can learn the rules when you’re an adult.” Finally he gets really mad and yells, “But how am I ever going to be a professional golfer if I don’t have clubs or balls or get to practice and I don’t know the rules to the game?”

This is what a lot of parents do, unknowingly, to their kids everyday in regard to personal finance skills. We raise them but rarely give them the equipment, rules or practice time to win The Money Game!

Three Steps That Last A Lifetime

Let’s look at the three things you can do to prepare your kids to handle money wisely as adults and, hopefully, grow up financially free.

Set The Best Example Possible

You must be able to set the best financial example you can for your child. Since human beings learn best by example, it is critical that you examine what you’re teaching your children through your own actions because, as the saying goes, actions do speak louder than words.

How can you expect your children to save if you don’t? How can you expect your children to understand money if you don’t? How can you expect your children to use credit cards wisely if they see you use them improperly?

You see, your kids are learning from you in three ways: by what they see you do, by what they hear you say and through the experiences you and they have with money. Know that they are always watching and learning from you in ways you probably aren’t even aware of.

Just keep asking yourself how you might ‘show’ your kids about money with your daily routine and don’t forget to include your kid’s friends too…they’re also watching and listening from you. Kids often learn better from people other than their parents so look for opportunities to influence all the kids in your circle.

Talk to Your Kids

Talk to your kids about everything related to personal finance. Open up a line of conversation about family expenses, credit cards, debt, interest, investing, business, real estate, the stock market, financial beliefs, etc. Some great times to talk to your kids about money are:

•   At the bank when you’re taking money out of the ATM. Ask them where the money comes from, talk about debit cards and ways people steal other people’s identities. Where ever the conversation goes is perfect.

•   Make sure that when you use a credit card, they understand the importance of paying the bill off EVERY SINGLE MONTH! Heck, show them the statement!

•   Let them help you write checks to pay bills or pay bills online. Teach them to check the accuracy of each bill.

•   Take your kids along when you visit your investment advisor or accountant, insurance agent or estate planner. Let them see what being responsible with money looks like.

Never assume that someone else is teaching your child about money. What children learn from parents who don’t talk about money is that it’s not OK to talk about money. Teach your kids that money is simply a tool to reach their dreams and help others reach theirs. This way they grow up to see the powerful benefits of having more money than they need and they grow into adults who help others.

Make Allowances a Practice Tool

Consider giving your children an allowance so they get plenty of practice learning how to use money wisely. In The Ultimate Allowance, I show you how to run the money you already spend ON your child, THROUGH him instead.

Consider this…if it takes an average of $300,000 to raise a child, don’t you think if you ran even a small percentage of that money through her, she’d get pretty good at handling it wisely? By having the opportunity to make thousands of financial choices—good and bad— children will learn how to manage their money before the consequences can be  disastrous.

In summary…

1.                  Please remember that human beings learn best by example. Your kids are watching everything you do with money, listening to everything you say about money and internalizing the experiences they are having with money, so pay good attention to the example you are setting.

2.                  Talk to them about everything financial. It’s the best investment you can make in your child’s financial future and I promise it will ‘pay off’ in the end!

3.                  Give your kids an allowance based on what you’re already providing them. Run the money through them instead of buying everything for them. This way they learn by doing…the best way to learn just about anything.

Bio:

Elisabeth Donati is the owner of Creative Wealth Intl., LLL, creator of Camp Millionaire and The Money Game, and the recipient of the 2010 Financial Educator of the Year Award from the National Financial Educators Council. She is known as The Financial Literacy Lady.

Elisabeth is the author of The Ultimate Allowance and writes a weekly blog called Financial Wisdom with a TWI$T.

Elisabeth is an expert in teaching the basic financial principles people need in a way that is engaging, empowering and fun. For information, visit www.creativewealthintl.org or call 805-957-1024.