Most parents aren't eager to talk to their kids about money. It's not easy teaching a topic that many parents struggle with understanding themselves.
But any parent in their right mind does want to avoid watching their kids struggle through life with money troubles. Studies show that children with savings accounts have less stress and more hope for the future. That alone is our wakeup call that our children deserve to be taught about one of life's most important lessons: handling money wisely.
First and foremost, don't be fooled: money is important, and everyone needs it. You can't do much without it. The problems start when you don't have enough money or you don't know how to manage it. Money is just a piece of paper, but your habits, beliefs and attitudes behind money bring it to life.
Money is a wonderful thing. It gives you choices, freedom and security to do what you're passionate about. Nevertheless, share with your kids that money should never define important, intangible things, like their happiness or who they are.
In celebration of "Financial Literacy Youth Month," below are 10 timeless tips parents can start implementing at any age. Always remember that your daily habits will determine your future successes or failures, so pick your habits wisely.
1) Kids have the greatest asset of all.
Time + money + compounding = wealth. Every child deserves to be taught this equation. Whether or not they understand it now doesn't matter; they will learn it as time goes by. When taught young enough, kids will become as skilled with money as they are with walking and talking. So stop spending on your kids and save for your kids. Then, when your kids are old 5 to 7 years old, start teaching them to do the same. A couple of dollars invested daily for 65 years can turn into millions, but only if it has time on its side.
2) Don't be naïve about money.
It's too costly! Learn all you can as fast as you can. Learn from other people's mistakes, and allow your kids to make money mistakes early in the comfort of your home. If it takes 18 years for your child to become educated in how to read, write and understand arithmetic, then the same should apply to money. As in school will never outperform Fs in finance. Make sure your kids know all there is to know about money before they leave the nest.
3) Practice the 10/10/10/70 concept.
Never let your child spend all they have. If you do, you are teaching kids to live paycheck to paycheck. It's been proven that you cannot create wealth by spending 100 percent of what you earn, so make sure that your children don't create that habit. For every dollar your child receives, have them give 10 percent to a charity of choice. Teach them to invest 10 percent to build their financial security; save 10 percent for emergencies; and live within their means by only spending 70 percent wisely.
4) Teach the right way to save.
After talking with hundreds of kids, I noticed that they have the wrong idea of what saving money really means. They think that saving money means saving for what they want and then spending it. That's crazy. This is not saving at all. It's just prolonged spending. Teach your kids that saved money is only for emergencies and in case they really need it. If you are saving to spend, so be it, but call it what it is!
5) Instill a strong work ethic.
Valuable people are hard to find. Teach your children to give all that they have, 100 percent of the time. Diligence is not a trait they are born with; it's a trait that is instilled in childhood and grows over time. A strong work ethic is the new master's degree: few people have it. If your children possess this trait, he or she will make more money.
6) Budgeting is like dieting.
Stop the "I'll start tomorrow!" mentality. Why put off until tomorrow what you can do today? Money and food go hand in hand: control one and you can control both. Spending is easy, but saving money takes a plan. Help your children make a plan for their money, just like you plan a wedding, vacation and your Friday night dinners. Teach your kids that we are all responsible for our actions. We cannot control what others do, but we have 100-percent control over what we do and say and how we act.
7) Everyone has a money personality.
Your kids' money personalities will determine how they handle their money. "Spenders" spend first and ask questions later. "Savers" ask questions and find a reason not to spend. No matter what their personality, as long as you are aware of it, you can help them make the appropriate adjustments. We need to spend for a healthy economy, but we also need to save to make it through the cycles of a down economy.
8) Learn to earn.
Stop giving your kids money! Giving your kids money for no reason is like teaching them to live off the system of doing nothing and still receiving payment. Have you experienced an employee who ignores you in the store? I bet they never had to earn anything at home. The simple truth is that money is earned through hard work, interest, business, ideas and innovations. Tell your kids that it does not fall out of the sky or pop out of ATM machines.
9) Do what you love and love what you do.
Passion is a wonderful thing. There is nothing better than loving what you do, because when you do, you will never feel like you are working. Help your kids develop their strengths and talents. Guide them to careers that fit who they are and what they love. Explore many opportunities with them in their youth. The more things they decide they don't want to do, the closer they get to what they do want to do.
10) Set money goals.
Setting goals can teach children how to ask for what they want without expecting others to hand it to them. As parents, we can help our loved ones succeed, as long as we do not do it for them. Teaching your child to set goals, take action and work for results is essential to their future successes. It will teach your child how to make decisions, be disciplined and take action toward the goal. In turn, this helps to create strong self-esteem and confidence in your children.