What are you teaching your children about money?

As parents, we intuitively recognize that teaching life skills is our responsibility. As such, we teach our children manners by constantly reminding them to use simple phrases such as “please” and “thank you.” We teach them about faith and God by reading the bible with them and praying before dinner. We teach them responsibility by assigning them age-appropriate chores. We teach them about personal care by having them bathe regularly and brush their teeth.

Parents are also often reminded that while we can preach these life skills until we are blue in the face, our children are more likely to mimic our actions than follow our words. So, if you’re telling your children to say “please” but not using the phrase yourself, your children are not likely to adopt that particular skill.

As I teach adults about how to handle their money and also have conversations with them about what they’re teaching their children, I am often met with a blank stare. For some reason, “handling money” is a skill that many parents have not recognized as THEIR responsibility to teach their children. Recently, I had a parent tell me, “I’m not good with math. That’s the school’s responsibility to teach my child.” My response? “I beg to differ!”

We don’t hold teachers accountable for teaching our kids the other life skills I mentioned above, right? So why is this skill any different? I think teachers’ plates are pretty full teaching our children subjects like English, Math, History and Science. We don’t hold our teachers accountable if our children don’t brush their teeth or express gratitude when they’ve received a gift…because we know that teaching these life skills is our responsibility. So let’s reframe how we think about teaching personal finance and handling money to our children and be deliberate about it!

While I could probably write an entire book on this topic, I’ve just started here with a brief outline of some basic principles that each of us can adopt with our children.

1. Money comes from work

Let’s be honest, as an adult, we know that money comes from work. If I don’t work, I don’t make money. But often we aren’t teaching our children this principle. I like to steer clear of giving my children an “allowance,” as it gives them the impression that they are entitled to money “just because.” Instead, I give my children an opportunity to earn “commission” if they are willing to take the initiative and do some work!

Don’t get me wrong…that doesn’t mean I pay them for every little thing they do—they have certain responsibilities and chores they are expected to do simply as a member of our family. They are expected to keep their rooms picked up, make their beds, and take care of their pets, among other things. They don’t get paid for these activities—it’s just part of living in our household and being in our family.

However, they do have an opportunity to earn money by choosing to do other tasks. I made a “chart” that sits in our kitchen and on each day there are several tasks that can be done, each of which has been assigned a commission amount. The first child to take the initiative and complete the task earns the commission. For example, if someone takes out the trash, he/she earns $1, and $3 for taking all the trash cans to the curb on trash day. Each Sunday, I tally up the total commissions earned and the kids get their “paychecks” in the form of cash.

2. Buying “things” you want requires money

Do you ever get frustrated that your kids feel entitled to everything they want? I know I do at times. But then I try to remember it is just another opportunity for me to help my children recognize it’s completely in their control if they want “stuff.” All they need to do is work for it and earn some commission so that they can buy it!

It’s amazing how quickly a child will admit that something she wants isn’t something she needs when its cost is hers to pay out of her own hard earned cash. I know my children started making informed, carefully weighed purchase decisions once they understood the difference between wants and needs, and they recognize that they can’t have it all. They’ve learned to prioritize their wants based on how much they’re willing to work to attain them. What a great life skill!

3. Saving and planning purchases is important

Wouldn’t it be beautiful if our children never went into debt and only purchased things they could afford with cash? Believe it or not, that is very possible if we teach them the right skills. When I pay out commissions each week, I have the children put 10% into a giving fund (they can choose to donate to church or a charity of their choice), 40% goes into a savings fund and 50% can go into their wallet to be used for purchases. I’m helping them start to understand the concept of delayed gratification.

A recent example of this proving very effective is when my 8 year old daughter continually asked me for an iPod touch. Of course, on her Christmas list she wanted the newest and best version. Rather than buying it for her as a gift, I recognized a huge opportunity to teach her about savings. When she was disappointed at not having received it for Christmas, I encouraged her to start saving for it! We got online and started to look up prices so she had an idea how much she needed to save. She quickly recognized that brand new models with lots of memory would require $200 or more, whereas a used model with less memory was only about $60. Suddenly, she was absolutely fine with the $60 model, including tax and shipping!

She made an envelope and drew a picture of the iPod on it, along with a huge 6-0 on it. We talked about the fact that if she worked hard and earned $10 each week she could buy it in just 6 weeks, or that if she did the normal amount of chores she had been doing and only earned $5 per week, it would 12 (which admittedly, is an eternity to an 8 year old).

So suddenly she went to work! She took $20 out of her “spend fund” in her wallet and decided that buying candy, gum or other trinkets was not as important to her as buying the iPod. She also got very focused regarding earning commissions and she surprised me by saving the $60 after only 3 weeks! She honestly beamed with pride when her iPod came in the mail and she treats it with more care and respect than I’ve ever seen her treat another object before. Because she went through the process of saving for it, she better understands its value! It was truly a priceless lesson.

4. Practice what you preach

Has your child ever said “Just put in on your credit card, Mom.” Mine has! A few years ago, I was admiring a gorgeous purse that I wanted and my daughter said “It’s cute Mom, you should get it.” When I responded “No honey, it’s too expensive.” She replied “Just put in on your credit card!”

That moment was a serious eye opener for me. It’s hard enough for a child to understand the value of money; especially when she sees us parents swiping credit cards rather than paying with cash. Credit cards dull the impact and significance of the cost of our purchases not only on us adults, but also on our children; their perception being that there is always more money available!

From that conversation with my daughter about the purse, I realized that I needed to be much more careful in what I was modeling for my children. I now try hard to make a point to pull out and pay for things with cash around my kids. And rather than making statements like “It’s too expensive,” I make statements like “It’s not in my budget this month…I need to think about how important this is to me and decide if it’s something I want to prioritize in my budget next month.” When I demonstrate prioritization and delayed gratification to my children, it’s much easier for me to ask them to do the same!