I recently did an interview about tips to use when teaching your kids about money. In thinking through some techniques, I was able to lock on some specific things we did which helped to better instill good money management habits in our kids. Here they are:
1. When our daughter was in her tweens, we started working with her about purchasing decisions and saving up for things she wanted. Here’s what we did:
- We kept track of inflows and outflows on an excel spreadsheet
- If she wanted something we would ask her if that was where she wanted to spend her budget. If she said yes then she made the purchase but then she had to wait until she had enough money in her account to buy other things
- Right after we put this into effect, she and my wife were in Nordstrom and our daughter saw a pair of flip-flops she wanted. She asked my wife if she could get them. My wife responded, “Is that where you want to spend your money?” She ended up buying flip-flops at Target.
2. Both our kids got checking accounts before age 16 and credit cards at age 18. The rationale for doing is that we wanted to make sure they learned about the concept of interest and making payments versus paying their bill in full every month. We wanted them to learn good habits while at home as opposed to learning bad habits while at college. While discussing with our daughter, she asked the question, “You mean if I don’t pay it off in full every month then I’m paying interest to the bank and getting nothing in return?” After I told her that was exactly the case she vowed that she would always monitor her spending so she could pay her bill in full every month. Both our kids are experienced with credit cards and neither has paid a dime in interest charges because they couldn’t pay their bill in full every month.
3. Our eldest is out of college and youngest is still in college. When our eldest got her first job as a nurse we had a deliberate discussion about her saving for retirement. She contributes the maximum amount to her 401k, has saved up enough for six-months of living expenses, and lives off the rest. She drives a ten-year-old car because it’s “good enough”. She still indulges in the nice purse or a weekend away, but does so within her means.
4. Most of the discussion has been about our daughter, but we did the same things with our son. He and his big sister are better disciplined money managers than many adults I know. Oh and our son is also mainstream autistic and still is able to manage his finances like a hawk.