Canadian Finance Blog

Want Your Kids to Manage Money Well? Teach Them

Posted: 24 Oct 2011 02:00 AM PDT

When we think about the lessons we as parents want to teach our children we think of things like religious beliefs, values, and encouraging them to attain the highest levels of education but we don't often think of practical lessons on money management.

Schools don't teach money management. They teach algebra, calculus, and geometry and although each of those is useful for developing abstract thinking, these skills have little practical purpose when it comes to everyday money management. (When was the last time you used a quadratic equation?)

If you want your children to someday become independent adults you have to teach your children these lessons. What should you teach your children about money? Here are a few ideas.

Saving

Teach your children that money isn't meant to be spent, it's meant to be saved so the person later has options. Those who save have little exposure to economic events because saving gives a person options. The nation's richest people are often vilified but most are rich because they've managed their money well and that first starts with savings instead of spending.

Pay your Credit Cards off Each Month

Ideally, cash would be the ideal way to live but in a digitized world, cash is becoming less practical although still very possible. Teach them that if they're going to use a credit card it must be paid off in full each month and if they find that they can't do that, get rid of the credit card and only use their bank card or cash.

Where Does Money Come From?

Money comes from work. It doesn't come from government assistance programs, the lottery, gambling, or get rich quick schemes. Money is the direct result of working hard every day. This lesson is best taught practically. If your children want money, they should do something around the house to earn it. Since education often equals higher paying jobs, pay them to reach the highest educational goals.

Giving

Money should be saved but it should also be used for the good of society. Teach your children to find valuable, true needs in the world and donate. Set up an account in their name on sites like Kiva to allow them to understand the power of giving. Although Kiva isn't a true donation, it allows them to lend it back out to somebody else in need making the giving perpetual allowing your children to continue learning this lesson over time.

Live By Example

What’s the best way to teach your children how to be good money managers? Live the life and show them real world examples of how you save today for prosperity tomorrow.

Kids who don't learn how to manage money become adults without the skills needed to live prosperously. Prosperously doesn't have to mean rich. It only needs to mean comfortable and with the ability to purchase what you need without resorting to credit cards and for those who hope to be among the nations wealthy, spend less and invest more.

Want Your Kids to Manage Money Well? Teach Them originally appeared on Canadian Finance Blog on October 24, 2011.