Over the years many parents have asked me how they can teach their kids to manage money. I’ve also had G2s come to me in desperation as they are now responsible for large sums of money and overwhelmed at the task before them. Think of how much better you would speak French if you learned it while you were young and had years to practice versus a crash course on the flight to Paris. Learning to make good financial decisions (big or small) works the same way. If we start teaching our children while they are young, allow them to practice and learn from experience, they will be much better prepared.
One of the most thorough, well thought out tools I’ve found to help parents teach young children healthy money habits is called FamZoo. While I don’t make it a habit to promote specific products, this one is worth touting. FamZoo was created by a G2 who wanted to be sure his kids learned healthy spending habits as he and his wife prepare them for inherited wealth. This virtual family bank guides parents, and kids, in taking small steps now that will prepare them for bigger financial responsibilities in the future.
If you are wondering how effective this kind of tool can be with your kids, read what the daughter of FamZoo founder, Bill Dwight, wrote on the company blog when asked about allowances:
On the How Much question, I particularly liked the advice: “the ideal allowance enables a child to buy some items but not others, thereby teaching selectivity and a basic form of budgeting.” (From Deciding On An Allowance at education.com) This goes for a child of any age. For example, my 8-year-old brother can either spend his money now on his favorite honey candy, or save for a few weeks to buy that set of Yu-Gi-Oh cards he’s been dying to have. Likewise, I can either spend money on a dinner with friends right now or save to buy those True Religion jean shorts I’ve been eyeing. Having a coveted item in mind makes saving worth passing up smaller opportunities along the way.
I think learning from your own spending mistakes is particularly important. I’ll never forget the time I blew half my clothing budget on a wear-it-once prom dress. I couldn’t afford any new clothing for the rest of the year – oopsie!
Well said, Haley! By providing boundaries (even when there’s plenty of money to buy it all), being consistent, and letting your kids learn from making their own mistakes, they will be better armed with the tools necessary to make bigger financial decisions down the road.
Check out the 6 Tips for Raising Cash Savvy Kids:
Still not sure if starting kids young is a good idea? Take a moment to read this article and learn how you can actually SAVE money by giving your kids an allowance. Sound crazy? It’s not. Learn more by reading: How to Save Money by Giving Your Child An Allowance