In last week's blog I pointed out the money mistakes that parents make with their children, and how to correct those mistakes. This week, I want to review and reinforce the healthy steps that parents are taking to help their kids to grow up financially literate.
1. Allowance and Budget
The best way to make sure that your kids understand the reality that Money Doesn't Grow On Trees is to put them on an allowance and to teach them how to budget their money.
No one gets a "free ride" in life and by giving your kids an allowance you are teaching them the "work for pay" principle. Your child's allowance is tied to chores and will show the relationship between work (chores) and money (allowance), clearly an important concept. Not only will the child someday work for money, but earning an allowance will underscore the fact that you, the parent, work hard for your money, too.
A budget is a healthy way of handling money. Routines, if they are started when your kids are young, stay with them all their lives. There are four components to my budget system: Charity, Quick Cash, Medium-Term Savings and Long-Term Savings. Ten percent of all money the children earn should go to charity. Then divide the balance among the remaining three categories. Discuss your kid's Medium-Term and Long-Term savings goals.
2. Need Versus Want
Kids learn "I want" almost as soon as they learn to talk -- or as soon as they see the inside of a store, or their first TV commercial. If you tell them "You want it, but you don't need it," they learn "I neeeed" almost as quickly -- and their first definition of "I need" is the same as "I want," but more persistent. You have to teach the distinction.
A Need: Something without which your daily living would be impossible, or very, very difficult.
A Want: Something that if you had, you'd be happier momentarily, but if you didn't, you could live without.
Remember, your child might want the most expensive, popular brand of new sneakers but wouldn't a less expensive pair work just as well?
3. Gender Equality
Societal expectations and gender roles have certainly come a long way since I first entered the executive work force, but according to the AAUW, in direct comparison, women still make 7percent less than their male counterparts.
Gone are the days when Dad went off to work while Mom stayed home to keep the house clean and raise the kids. Now, 70.6 percent of mothers are working, and some fathers even choose the reverse role of staying at home. In 1972, the Ms. Foundation for Women released the groundbreaking illustrated book and record album Free to Be...You and Me which featured "Marlo Thomas and Friends." The basic concept was to encourage gender neutrality, individuality, tolerance and comfort with one's identity. The prime message is that anyone -- boy or girl -- can achieve anything.
This is such a strong and enduring message. Empower your girls and impart the knowledge of equality in your boys. Remember that you are teaching the future work force and that kids learn from the example you lead -- maybe your child's generation will see gender pay parity. It's about time.
We need to teach our children all the ways money can work positively: it works to cover immediate expenses, like lunch money; it works to build for the future, like saving for college; and it can be shared with others to help those in need.
Charitable giving is a lesson with great impact to a child or young adult and, it is an opportunity for you to impart your personal values to your youngster. Charity is an easy concept to explain to children, who are very aware that it's good to help others. But, it doesn't come naturally -- it has to be taught -- this is why it is included in my budget system.
Charitable donations can be made in many ways, from giving change to a homeless person on the street (a powerful visual lesson), to giving to a specific charity that you and your child choose together. Remember that charity can also mean giving of yourself and your time as well as money. This is a great family project and fodder for family dinner table discussion.
5. The Greening of Money
I teach parents and kids to look at the world from both an ECOnomic and and ECOlogical point of view. We strive to keep our family budget in balance -- spending and saving equals earning. If you spend more than you earn, your budget is "unbalanced" -- and you go into debt.
By producing more pollution that can be absorbed and recycled, we are going into "debt" with our planet. Teaching kids to be aware of their environment can save precious natural resources and save money. Recycling, reusing and reducing waste have a huge impact on our world.
Teach your kids to recognize the Shmootztm in their world and give them the tools to help clean it up.
Are you proud of money lessons you're teaching your kids? We'd like to hear from you in the space provided.