file0001679856317“Too many people spend money they buy things they don’t impress people that they don’t like.”                                    -Will Rogers

Sally and Smitty brought their two kids, Hilary, age 13, and Justin, age 10. The parents were constantly fighting with the kids and each other about money. We talked not only about how this family made decisions about money but also about what Sally and Smitty had learned in each of their families growing up.
In Sally’s family, money had been the main instrument that her father had used to control both his wife and the kids. When her dad was pleased, he bought her whatever she wanted, and when he was angry, he was a tightwad.
In Smitty’s family, there was never enough money. His parents amassed huge debts, constantly bought things they could not afford, and were even now trying to borrow money from Smitty. When Hilary and Justin made impassioned demands for the latest fashion items or video games, Smitty always said no and Sally wanted to say yes.SONY DSC

Sound familiar? Disagreements about money–how hard you should work, how much you should save or spend, and who gets to make the decisions about it–are often the cause of conflict in families. What are some of the important lessons that parents should be teaching their kids about money? What do you wish that you had learned as a child about money that could have saved you a lot of time and trouble?

#1 Start teaching your kids about the connection between work and money when they are little. Money does not grow on trees.

Start by giving your child an allowance when they are as young as six years old. Make it clear what kinds of expenditures the money is for. Some parents link allowance money to household chores. The disadvantage of this strategy is that kids get the message that they should be paid to help out. I think it’s better if kids are taught to pitch in simply because they are members of the family, not because they are paid. No one pays Mom or Dad to make dinner. You explain that you are giving your kids an allowance so that they can learn about money. Period.

file000971208789#2 Almost all success in life comes from hard work, persistence, and practice.

Talk to your kids about what you do at your job, and take them with you to work if you can so they really get the picture. Tell them about the jobs you did as you were growing up and what you were paid. Teach them about how the people that work hard, get to work on time, are responsible and thorough, tend to get promotions and pay raises. Make sure they know that there is no job that is all fun, but that satisfaction and more choices come from working hard and being financially independent.

#3 Teach your kids how to save money and the pleasure in delayed gratification.

Money gives people, young and old, more choices and greater opportunities. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend.The best way to encourage sound spending habits is to exhibit them. Make a special trip to go to the bank and open up a savings account with your child. You can also pay interest on money your child saves at home and show them how money grows.

#4 Teach your kids the difference between needs and wants.

Even young kids can understand the difference between the things we need such as food, shelter, or basic clothing and the things we want, such as toys, games, brand new designer clothing, vacations, or eating out. When planning a trip to the grocery store, get your children involved in making a shopping list and sticking to it. This will teach them to avoid impulse buying. If there is something special they want (not need), allow them to use their allowance money.

#5 Teach your kids about having a budget so they begin to understand how much things cost.file9711283703792

Going to the grocery store is often a child’s first spending experience. SInce most families spend about a third of their take-home pay on grocery and household items, teaching kids about costs and comparative shopping is essential. Have your kids cut out coupons, compare prices for the same item, and learn about buying items on sale. Allow an older child to help you plan economical meals, avoid waste, and use leftovers efficiently. Talk around the dinner table about pros and cons before buying a big item. Encourage them to use common sense, and show them how to do research on-line before making major purchases.

#6 Teach your kids about charity and the gift of giving back.

Did you know that lower income families give a higher percentage of their earnings to charity than higher income earners? Perhaps because these families really understand the difference between needs and wants. Just as kids can easily learn to save one tenth or more of their allowance, they can be taught from early on the importance of giving to others. Exposing kids to others less fortunate builds numerous strengths–compassion, empathy, and awareness to name a few–and it shows them one more thing that money can buy–life-saving help for others. In an era where far too many parents complain about their kids sense of entitlement, these are important lessons to start teaching early.