As a child I used to hear, do as I say not as I do.  In actual fact people learn from example.  If you are prudent about money and teach this to your children it is very likely that your children will also be prudent about money when they grow up.  Many years ago one of my clients said the reason he wasn’t very good with managing money was because his parents never taught him how to save.  This client had always heard that you should pay off your house but was never explained or shown how to do that.  In the end the client had his home paid but he had thousands and thousands of dollars in credit card debt.   When we met I had to explain that even though he had his house paid he really wasn’t mortgage free.  All the credit card debt amounted to what a mortgage would have been except that he was paying extremely high interest charges.  We had to consolidate all this debt and put a mortgage back on the house so he could get his finances back on track.

It is easy to think you are doing the right thing when you focus on the one big thing while not really understanding the price you are really paying.  This person’s goal was to have no mortgage so all money went towards paying off the mortgage.  The bragging rights of not having a mortgage in the end cost the client dearly.  This story is not to depress you but to encourage you to really look at your overall finances and learn the lessons it is teaching you and using this information to teach your children.

Some of the things you can start with is demonstrating the value of things when children are young so they appreciate what they have.  Explaining how hard it is to earn money.  Teaching children how money has to be saved for the future so they can benefit from maintaining certain lifestyle without a mountain of debt.

Some lessons we think you can teach children are the following:

  1. Openly discuss money with things like paying bills, cost of living such as buying groceries, etc.  The point is to get your children used to money talk so they eventually understand and are comfortable discussing things with you.  This is not really taught in school but is such an important subject when they eventually leave home.
  2. If you have an education plan, you may have a couple of stocks you can discuss with your child and let them be a part of making the decision which one they will have in their education fund.  This will teach them about owning companies and they can watch over time what happens with the company.
  3. When your child is old enough to get a small part time job, you can teach them the value of saving their money for something they really want versus the instant gratification of spending money just because you have it.
  4. Take your child shopping and teach them about looking for items on sale versus buying at regular price.  This works for grocery shopping as well as clothes shopping, etc.
  5. Get your children involved in planning family vacations.  You can teach them about the cost and what is needed to be done/sacrificed to come up with the money.
  6. Teach your children about wants versus needs.
  7. Teach your children about credit scores and how excessive debt can lower their scores.
  8. Teach your children about how credit card companies charge interest and why they should always pay off their credit cards in full every month or not use them.

You may find other things that are important about money in your family to teach your children.  The point is to see what examples you are setting for your children when it comes to money.  If you didn’t have good training regarding money when you were younger it is now time to break that mold and have a new beginning for your children.  Make your children responsible adults when it comes understanding money.  It all begins with you.

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