Want to Teach Your Kids About Money? Try These Tricks

If your children grow up to be financially irresponsible adults, there's a good chance you'll bail them out, at which point their financial problems will be yours. What to do? It may be time for some financial self-defense--and perhaps the best defense is to raise money-savvy kids. To that end, consider these seven strategies.

First, have your children create a wish list. Kids are often the worst sort of impulse buyers, desperate for a particular toy today, only to lose interest tomorrow. To help temper this behavior, get your children to write down the things they want for their birthday or to buy with their savings. Every month, go over the list with your kids and see which items they want to add and which they want to remove. Their wish list will, no doubt, change constantly--and that's something you might want to point out.

Second, play the soda game. When you go to restaurants, offer your kids a choice: They can have a soda or they can have a dollar. Suddenly, their choice has financial consequences--and you may be surprised by how much water they end up drinking.

Third, give your kids more pocket money, but less frequently. For instance, instead of giving them $5 every week, you might give them $65 every three months. The larger amount will seem more precious and it'll make them think harder about their purchases. And because the money has to last three months, they will be compelled to budget.

Fourth, set up a bank account for your kids. Deposit their pocket money into the account. That way, your children are more likely to feel like they're spending their own money. After all, instead of asking you for cash, they will need to ask themselves--and then head down to the ATM.

Fifth, manage their expectations. Most parents happily cover the bills through age 18. Then, the tough choices begin. If you decide you can't afford to pay for college or you have no intention of footing the bill for a $20,000 wedding, tell your children now, so there are no bruised feelings later.

Sixth, set a good example. If your own finances are out of control and your kids are well aware of it, your fine efforts at financial education are likely to fail miserably.

Finally, talk about your own financial struggles. Today, your children may enjoy a comfortable existence in a middle-class home. But there's a good chance that, when they first enter the workforce, they'll struggle to make ends meet. You may want to prepare your kids for those struggles by talking about your own struggles when you were new to the work world.

Indeed, financial values are often passed down to our children in the family stories that we tell. These stories can be far more powerful than any lecture you could deliver on the importance of financial responsibility.


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