While teaching has its place in raising our children, the example we provide in how we actually behave in our own lives is much more important. The instruction”do as I say, not as I do” rarely works. It is only when what we say or do is closely aligned that we have a good chance of creating behaviors in our children that are likely to last.
It stands to reason the best way to teach our children about money is by providing examples of the behaviors we want them to demonstrate.
If we want our children to be responsible stewards of money, then we have to demonstrate such responsibility in our own lives. This begins with having a budget for the family that becomes the foundation for how money is earned and spent. If the budget is honored, and explained to the children in terms they can understand, then the children are more likely to budget when they grow up.
Conversely, if the children are told budgeting is important, but the budget is not followed, then it is unlikely that budgeting will be important to them as adults.
Children should learn about choices around money, saving for important goals, and deferred gratification.
Something as simple as helping a child budget an allowance can be an important first step in this process. As they get older they should also be a part of the decisions surrounding their college education costs. An honest discussion of how much the parents can afford to pay towards that goal, along with a joint discussion of how it will be funded, is an important long-term lesson in reaching a financial goal.
Finally, the best thing parents can do to teach their children about money is to go through the financial planning process as a family. I can’t think of a better way to instill responsible financial behavior than to systematically go through the financial planning process. Even very young children learn a lot about money by discussing the elements of their plan, and the concrete steps they are taking to achieve their financial goals and objectives.
In a very real way this process demonstrates the importance of identifying the family’s current financial status as a starting point. It then provides a road map for how to reach future goals, and usually demands budgeting, hard choices throughout life’s stages, and hopefully the actualization of their goals by reaching critical mass by the time they retire.
If children are brought into this process, whether they are five years old or fifty, they will be learning about a process they can apply in their own lives through teaching the important steps to achieving financial goals and then actually applying these lessons in real life situations, parents are actually “walking the talk” with their children and giving them the best opportunity to mirror these behaviors in their own lives.
They say “kids say the darnedest things” and they often learn it from their parents.
Would you add anything to this?