Aug 27, 2010

Teaching Your Children About Finances (Merrick)

I've been thinking a lot lately about how I, as a mother, will teach my children about finances. Obviously with only one child who is four months old this might seem a little soon to be thinking about this, but I don't want to be one of those parents whose child is suddenly eighteen and I have yet to give the topic much thought. By then I feel like it is much too late.

I found this great article on Penniless Parenting that talks about this, so today I thought I'd share:

Teaching Children Good Money Habits

Enjoy, and Happy Friday!


Stephanie T said...

I LOVE this topic. I just have to share this because pretty much every time I do people are like "Oh, yeah that totally changes what I am going to do with my kids."

It is a fallacy to teach you children that they can spend all that they earn or even most of what they earn, even if all they earn is quarters for doing simple task around your home. That is not real life, in real life there are taxes to be paid and living expenses. There will never be a time when they will be able to spend 100% of what they earn or even 80%, so why would you let them practice spending like that now.

We have our children pay 10% of what they earn to tithes and 50% into a savings account for their future. Put simply, we provide for all their needs so they can save that $$ for their future. They can play with the remaining 40% as they wish or save it up for a larger purchase they want to make.

Parent should also model this for their children as well. Keeping all of your mandatory living expense and taxes to 50-60% of your salray allows you the room in your budget to accomplish financial goals as well as have the life-experiences you desire.

Melissa said...

I love this topic too.

I learned something from a friend that I want to implement when I teach my children about finances. When her children want to buy something (toys, junk food, luxuries) rather than saying "we can't afford that" she says "that's not something we are going to chose to buy."

One of the best lessons I ever learned was from my mom who has always been a great example of financial literacy and making wise, sound financial choices.

When I was 5 years old we were at the store and I wanted my mom to buy me a fancy hair clip for 6 dollars. She said that it wasn't a good choice. I came up with the brilliant idea for her to buy it for me and me to pay her back later. She took the opportunity to teach me about debt. She pointed to her old dirty white shoes. She asked if I would want to buy dirty old shoes (of course not). She explained that if we buy something with borrowed money, we will have to pay money later and because we borrowed it we'd have to pay even more. I thought the very thought sounded discussing and stupid (especially when she pointed out having to pay extra money for old shoes).

Because of this and other experiences, my husband and I live debt free (except for our home) we have paid for one bachelors degree and two masters degrees by being smart and frugal. I attribute all this to the things my mom taught me. Like Stephanie my mom also taught us about tithing and 50% (after tithing) to savings. It was a huge benefit.

Little side note, my brother asked my mom to buy Doritos one day and my mom said it wasn't a good choice because they weren't on sale. My 3 year old brother thought about it for a minute and replied "I bet Laman and Lemuel would buy those chips."

Even though your baby is only 4 months old, kids listen and understand more than you think, most importantly--kids learn by example!

Packrat said...

I'll have to read the articles later, but teaching children about finances is a great thing. I truly believe they should know the value, cost, and sacrifices made for them if there is a way of doing it without making them feel guilty, stressed, or scared.

Hats off to Stephanie. Also, Carole, I know from what your daughters have written over the last few years that you have taught them well.