Our children are learning financial lessons from us, whether we realize it or not, through our actions, behavior and words. Are they learning useful lessons? Is their learning a positive experience?
The best approach is a proactive one, where they learn lessons from our intentional conversations about personal finances. This starts with a foundation of values and priorities that precede economic decisions. Do they choose their friends by who has the biggest house or the best clothes or the most stuff? Or do they choose their friends by who is the most genuine, honest, humble and caring? Watch for "teachable moments."
A dose of financial reality may come with your child's first paycheck when they ask, "What's FICA?"
Teaching Kids About Personal Finances
There is no predefined or perfect way to teach children about personal finances. It starts at a young age with simple discussions about self-esteem, personal values and relationships. It can include discussions around presents at birthday parties and at Christmas. It can progress to dealing with cash as they may get allowances or babysitting or lawn-mowing income. The first dose of financial reality may come with your child's first official paycheck when they ask, "What is FICA?"
As the years pass, they will reach the stage when they can have their own bank account with mom or dad, followed by an ATM card or credit/debit card and checkbook. Explain the difference between a debit and credit card. Teach them how to write a check, even if hardly anyone does that anymore. They should understand the principle.
Explain to them how mom and dad make financial decisions. Explain, without lecturing, the sacrifices or trade-offs that are made to achieve personal goals and priorities. There's no harm or guilt trip in dad saying that sending a child to summer camp was more important than buying a new set of golf clubs, if you present it nicely and factually.
Turning 16 opens the doors to financial responsibilities of a car, including insurance and gasoline and maintenance costs. Preparing to go to college will certainly open some discussions about savings, grants, scholarships and loans. Hopefully a foundation of understanding financial principles and the value of a dollar will have been achieved by this point. Early adulthood may introduce buying or leasing a car, renting or buying a house, and the biggest of all debts, a mortgage!
Financial Lessons to Last a Lifetime
Decide for yourself whether you want your children (and grandchildren) to learn about money and personal finances by observation or by using a proactive approach. Either way, these will be lessons that influence them for a lifetime.