Teaching your kids about money management isn't an easy proposition. Between the hulking advertising industry dying to get its hands on your children's disposable income, and peer pressure to buy the "right" brands, parents can feel they are fighting an uphill battle when they talk about saving and moderation.
While it would be virtually impossible to eliminate these influences, you can mitigate the negative effects they have on your kids' money habits. Teaching your kids to delay gratification, save hard-earned money, and be wise consumers offers them critical skills that will pave the way to a successful adulthood.
Here are some things you can do to teach your children what they need to know about finances.
1. Be a role model.
If you want to teach your teen good money management skills, model them yourself. For instance, if you have a wicked credit card habit, you can be sure that your 15-year-old will be the first to point out your hypocrisy.
2. Make your kids learn the value of money.
When your kids are older, encourage them to get a job. While this will mean more disposable income (just what advertisers are hoping for), it's also an opportunity to learn about the value of time and hard work. The purchase that looked perfectly reasonable when you were paying for it can seem less necessary when your kids realize they had to work five hours to earn it.
3. Reward savings behavior.
According to one source, kids today spend five times more money than we did at the same age (adjusted for inflation). Reverse the trend by rewarding responsible cash conduct. Set up a kid-sized version of a 401(k), and offer to match money that they sock away for themselves and others (e.g., $0.50 for every dollar they save for themselves; a dollar-for-dollar match for money they raise for a good cause).
4. Manage expenses.
On the expense side, your kids can benefit a lot from good values. Show your kids how to bargain-hunt. Say no to credit cards, at least until a child has demonstrated a high level of responsibility. Plastic tends to add to a sense of unreality about money, while handing over a stack of bills is a visceral reminder of an item's cost. And in particular, use a cell phone bill as a great example of keeping expenses under control. Cell phones provide a unique opportunity to teach your child about obeying limits and the high costs of exceeding them. Require that your children pay for any excessive phone charges, and you may get them practicing moderation in no time.
5. Let them decide.
Create plenty of opportunities for either/or decision making. Saying "yes" to all of your children's requests doesn't require them to practice any decision-making at all. Make sure, even if you have the means to indulge every wish, to say "no" from time to time without guilt. Teach your children to think critically about the advertisements aimed at them, and watch as they make better decisions.
Despite your kids' growing protests as they approach college age, parents like you still hold a lot of influence. Using it to teach your kids effective money management is a gift that will last a lifetime.