Tuesday, December 22, 2009

Times are Tight ... Teach Kids About Money

When do you teach your kids about money?  As soon as they're old enough to realize that they need money to get the things they want, and their parents have the money, they are old enough to learn. 

I subscribe to the Love and Logic® Parenting philosophy, so if you're looking for specifics from the experts of today, go to www.loveandlogic.com and check out the book entitled Millionaire Babies or Bankrupt Brats,by Jim Fay and Kristan Leatherman. 

In light of the economic crisis we're enduring in the United States, it's vital that we not only learn from our mistakes, but that we share the experience with our children.  If you have to cut back, everyone cuts back - and explain why (concisely), being candid about your poor choices.  All too often mom and dad forego satisfying basic needs so that the child can "enjoy their childhood."  This is a poor example of parenting and reinforces a detrimental message of entitlement to the child. 

Mom and Dad can and will make mistakes.  Don't view financial strain as a time to feel guilty and enable your child to be a victim.  Instead, consider it an opportune time to discuss how our decisions can inadvertantly affect others, as well as ourselves.  Then collaborate with them to discover ways they can help the family get through the lean times.  Yes, the lack of funds may not be their doing; but they do enjoy the privileges and advantages that accompany prosperity.  You're all in it together, so get through it together.  As you learn, teach them.

In the meantime, here are some tips from the Love and Logic® Institute's Millionaire Babies or Bankrupt Brats, :
"Parents who share their financial stories, both triumphs and failures, raise kids who learn about the day-to-day relationship between money and life."
"Wise parents give allowance when they can afford it, and model restrainst when their financial circumstances change."
"Wise parents don't pay their kids for completing chores."
"Praising kids excessivesly - for nothing and for everything - creates future adults who feel both fragile and entitled."
"Wise parents teach their children the difference between needs and wants.  Delayed gratification is vital preparation for a successful adult life."
"Kids who are taught to delay gratification now, learn to avoid the temptation of instant gratification later."
"Wise parents are careful not to addict their kids to a lifestyle they won't be able to afford as adults."
"Kids who frequently practive borrowing and repaying loans when young rarely experience bankruptcy as adults."
"Kids who experience how debt can affect the quality of their lives when young tend to avoid the devastating effects of excess debt as adults."
"Wise parents never pay their kids to do a job when the neighbor kids are willing to do it better ... and for less."
"Wise parents know that it is not in their kid's best interest to pay them for good grades."
"Wise parents remember that their kids may well be the ones to manage their future finances and pick their retirement home."
When we don't take the time to consider the messages - spoken and unspoken - we send our kids about money, we're not setting them up to win as adults in the real world.  The only way to do this is by example.  As the King of Pop said, start with "the man in the mirror."  Kids are more likely to do what you do than to do what you say.  Are you living within your means?  How does instant gratification play out in your own spending habits?  How well can you distinguish between a need and want?   

Thanks for reading.  Be sure to post your questions and comments here.

-Ruth, Keeping it Real

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