Teaching Kids About Money

By Dan Danford, Family Investment Center
From Table Talk, August 12, 1999

Raising children is a common theme many of us face. As parents, we walk a fine line between giving kids what they want and teaching them important lessons about life.

Every family is different and so is every child. So, things that work with my girls may not work for you. But, I get many questions about money and kids, so these are some thoughts on the subject. Experience has been my main financial teacher, so the ideas aren't sacred and they continue to evolve. (I confess that my school counselor wife influences me. In fact, if you like an idea, if probably came from her. If not, lay the blame at my feet.)

First, kids won't learn good things about money unless we teach them. Default is unacceptable. What financial lessons come from television or other children in our schools or neighborhood? Are these lessons we want our children to learn? We must take positive action to override bad examples seen almost everywhere.

How should we teach the right lessons? Start by setting a good example. Forget what the spoiled athletes say; we are role models. Our children watch carefully and imitate our behavior. If we show prudence and discipline about spending, so will they. If we regularly save and wisely invest, so will they. We are the money gods in their lives, and they look to us as their mentors.

Let them learn through mistakes. A regular allowance is a great tool for this. Let them spend as they want, but patiently coach them in reaching good decisions. When they make bad decisions (and they will), let them suffer the consequences. Don't bail them out if they overspend. Overall, allowance dollars are tiny, but life lessons taught here can be huge.

Teach them to work. Children will not grow into productive adults unless they learn to work. Period. There's a good chance they won't want to work and a strong temptation to let them "enjoy life" as a teen. But, one critically important life lesson is to balance work and play. They won't learn this lesson without working and adulthood may be too late.

Life's focus shouldn't be finance and placing too much priority on money can be bad, too. So, a most important gift for our children is the lesson of perspective: in life, people are most important. Money is simply a tool to help the people we love. Nothing more. Nothing less. If we teach them this, our children will prosper.