Throughout history, older folk have been worried that the younger generation will bring about the downfall of society.
It never really happened.
But that doesn’t mean that differences between different generations don’t exist. For example, Millenials have been more aggressive in cutting credit card debt than other generations since the Depression started, even though they have substantially lower incomes and bleaker job prospects which should make paying off debt harder. Today’s children still need to be taught good financial habits so that they end up more like Millennials and less like Millennials’ Gen X parents and Boomer grandparents. That’s why I’m sharing a few things you can do to teach your kids about good personal finances:
Make sure they work during their teen years
A lot of teens are having trouble getting jobs these days because the labor market is so crowded, and it could get worse if the retirement age is raised. However, if you teen can get a job and it won’t interfere with sports or other extra-curriculars, you can teach them not only about having spending money and managing it, but also about how money doesn’t grow on trees. By having to work hard for money, they’ll learn to value it and save it!
Give them a meaningful allowance
If they don’t work, they still need to learn how to save and manage money, and the only way they can do that other than nittily saving Christmas checks from grandparents is if they have an allowance (on a side note, paying older children to do chores is bad because it implies that doing house chores is a favor for their parents). Giving them money at regular intervals, instead of when they need it to go out with their friends or buy something, will teach them to save some money for a rainy day. This way, they’ll learn to budget it since they only have a limited amount till they get more money from you.
Teach them about business
Starting a successful business is all about planning ahead: You need to have a roadmap for where your business is going before you even think of a name or make a logo. When my boss started Influence People in 2011, he figured out beforehand how his business would work: He would do PR work for various clients, who he’d meet at trade shows, MeetUp events, and in the office building. From those connections, he would expand his business to meet more new clients, and continue to meet new contacts at shows and MeetUp events. Now, Influence People is up and rolling now and we have many clients.
You can teach them about business yourself if you know about it, but the best way for them to learn is to plan on how to start a business themselves. Luckily, the Secret Millionaires Club is having a contest where kids can submit ideas for starting a business. The submissions need to include how the business will operate and how it will be profitable, and the winning kid will win $5000. you can use this as an opportunity for your kids to learn about business, even if you’ve never started one yourself!
(This is a guest post by Steve Sims. Steve is a marketing and PR professional who currently works for Influence People, an online marketing and blogger outreach consultancy in San Francisco.)
I disagree with your statement on giving money to kids. Giving them money, without any meaningful work behind it implies that the parent is a bank and will just provide money. Even older kids have to earn the money. If instructed properly, there is no reason for a child to believe he is doing his parents a “favor”. If a child is doing chores for pay – you need to set it up in a way that shows the child that *is* their job. We all have jobs – and theirs is helping around the house.
Whether they do chores or not to make money isn’t the point. Kids need to have some money, whether they get an allowance, work a job, or get paid to do household chores, so that they can learn to budget their money.
“Giving them money at regular intervals, instead of when they need it to go out with their friends or buy something, will teach them to save some money for a rainy day.”
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I agree with Steve above. The point is teaching them to save. Eventually they will earn money from jobs or whatever but you have to teach them early to save. Let them bring money to the store and force them to make hard decisions on either “candy” or “ice-cream” for example.
The goal is to teach them to save their money. They save their money if it is of limited supply regardless of whether they work for it. How they get it is irrelevant to whether or not they learn to save it unless they are the kind of person who won’t save it unless they have to invest time into it, but most kids aren’t like that and will save their money as long as they don’t have a lot of it. Also, if you raise them correctly then they should have a good work ethic (gained through school, sports, etc.) so that they don’t have to learn it working a job as a teenager.
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When my children were small and they received an allowance, we insisted that they save 50% of their money. As they were older, they saved for their first car. to encourage savings, I added an incentive of matching their savings to buy a car. My children are successful adults without debt (except a mortgage). They each save for the things they want or need. I think they learned a great deal from the experience.
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I think teaching kids how to be responsible is one of the most important things you can teach them. It really prepares them for life.
I found as much as my parents tried in some ways they lacked teaching me about other things related to personal finance. I had to learn the hard way on some things. I will definitely try to prepare my kids as much as possible.
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Very good tip on having them work during their teen years, so long as the work actually benefits them and does not harm their school! I benefited a lot from this myself.
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