Like many other life skills, children learn how to use—or misuse—money from their parents. If children "live what they learn," what are you teaching them?
We believe that you do your children a disservice by treating money like an "adults only" topic. Start early. Talk often. Explain and demonstrate…at their level. If you are asked for an expensive toy, instead of saying "no," explain that the budget does not allow for it this month but that you can help your child save toward that purchase. Then start. One idea is the "Family 401k" program. Offer to match whatever your child saves with a 50% or 100% match as an incentive. Teach them to wait for the item. You may find that over time, the desire wanes or disappears, but there will be money for the next thing…and they can purchase it. Their investment in the process makes it more meaningful and can lead to other good outcomes like enhanced self esteem, self sufficiency and personal agency. So go for it. Say "Yes" to their requests, but make it "Yes, I will help you save for what you want and I will show you how."
For older children, we suggest giving them a monthly budget for what you agree are their essentials. This could mean all of their lunch money, "fun" money, and money for clothes and toiletries. Start out by explaining they have to make it last for the WHOLE month. If they blow it, let them feel the pain…and then start over the next month. Don't bail them out. Show them how to shop and teach them how to decipher if something is really a bargain. Is a "Buy One/Get One at 50% Off" as good as just waiting until what you want goes on sale? Each answer will be unique, but start the conversation. You may be surprised at what you learn about yourself as well!
Aside from philosophy about saving, there are vehicles such as a 529 accounts, UTMA's, Coverdale accounts and special rules for Roth IRA's. If you would like more information on how these work, send us an email at the link below.