Your Kids, Their Money, Our Government

As I write this, our Congress has not yet passed the bill to determine how much you and I will pay in taxes for 2011, which is only two weeks away. We elect people to make wise and timely decisions, especially about something as important as spending our tax money.

As we see what is happening to our economy, we all seem to agree that spending beyond one’s means can lead to financial disaster. We know that as ordinary citizens we could not spend beyond our means the way our government has and continues to do.

So what does this mean when you’re teaching your kids about money? In my opinion, we, as adults are responsible for providing the next generation with a better understanding of how to manage money.

For the purposes of helping your kids understand the broader financial landscape, let’s sort money ownership into three buckets: 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.

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.

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 the local, state and national officials you select in the voting booth.

How can you help your kids understand how our government spends money? Let’s start by saying that money is anything that is generally accepted as payment for goods and services and repayment of debts.

Money, indeed, makes the world go around. We simply cannot exist without money.

When we use money in transactions we are essentially agreeing on value of goods and services. We also place value on our employment, understanding that skill and knowledge can increase our value in the workplace. No matter how we look at it the amount of money we have as a resource is limited by the world we live in.However, knowing how to manage money gives us the ability to control what we do with it. We often talk about, “living within one’s means”, “making every dollar count,” and “spend less than you take in.” These maxims are the essence of money management, defined as having the ability to use one’s financial resources wisely.

Teaching your children to manage personal money. 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.

Preparing your children to manage family money. 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.

Helping your children understand government money. 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.

Follow me on social media: