Recently I happened to tune in to a radio call-in show where the topic was “The Cost of Financial Literacy.” So as a first-time called I dialed in to add my two cents worth about my favorite topic kids and money. After some energetic questioning by the screener there I was live on radio with my two minutes of fame.
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My point was that parents don’t have to be financial experts to prepare their kids to be financially responsible as adults. After listening to my short comments you’ll hear a great example of how to teach your kids about money written by Joe, a dad. The game he’s playing with his kids is called “Government.” Love it!
So what does this mean when you’re teaching your kids about money? The lesson is that there are three buckets of money: personal (or individual), family, and government.
Personal money. A child’s first money experience is “all about me.” While we are young, without financial responsibilities, we spend money only on what we want and that’s that. This works quite well until we become adults and have to pay for essentials like food, shelter, et al.
To prepare your children for the future, your job as a parent is to create a child-size version of real-life money management and responsibility. By using a system like The No-Cash Allowance you place control of cash and non-cash money in the hands of your child while requiring them to meet their responsibilities, e.g. pay their bills.
Family money. Children do not have spouses or partners, so there is no need for agreement on how to spend money. Deciding how to manage money in a relationship with more than one person requires communication and compromise.
You can help your children learn the art of compromise and negotiating spending decisions by building these opportunities into their allowance and earning system. By requiring your kids to “pay their bills” you help instill the self-discipline necessary to make reasoned spending decisions.
Government money. The government gets its money from the people who elect it. Everyone who owns or earns money (or other items of value) has to give some to the government. Decisions about how to use your money are made by local, state and national officials elected by voters.
Kids need to know that money is a limited resource and there are responsibilities to be met. Only parents can provide the resource (money) and the guidelines (responsibility.) By doing so parents can help their children understand that one has to live within one’s means, whether that be as a child, adult, or elected government official.
Your children are learning spending habits that will stay with them as they grow up to be the leaders of tomorrow. By recognizing the different buckets of money, you can help your child prepare for the future. Perhaps your children will be the ones making “government spending decisions” that are truly wise and timely.
-Lynne Finch, author, The No-Cash AllowanceFollow me on social media: