Submitted by Nancy J. LaPointe
“How do I teach children about money?” This is a consistent question. I’ve read from many sources that children prior to their teens learn from stories and experiences of others. This goes far to explain why “you cannot teach teenagers”, they are wired to learn from direct experience. With this in mind, I’m going to focus this writing on children under 12. First, start early, avoid giving money to a child except at known and consistent events, like birthdays. I will, in another article, share more about this topic of “Children and Money”.
Talk in the presence of your children as you determine how to spend your funds. I’m not talking about things like refinancing the house or the allocation of your retirement funds. As the parents, the CEO’s of the family corporation, have a budget. Within that budget, you should have a discretionary/fun fund with both short and long term objectives.
It’s Wednesday night, and as the parents, you are planning your weekend entertainment. You have budgeted $XX for the month. In front of the child, go over the options, the base costs, anticipated related expense, place an intangible value on the options and make a choice. Let the child hear that there are considerations to be reviewed, such as cost, as well as intangibles, such as value of time, interaction with each other, lessons learned by exposure to social settings, culture, science etc. The intangibles both have long and short term consequences. Let the child hear a decision process being engaged. Later as they are closer to 10, give them opportunities to participate, such as deciding to take a picnic or eat out, watch an animal show at the zoo or take the ski lift over the zoo. Then stick with the decision you made as a family.
At other times, share the family objectives, such as remodeling the kitchen. Explain why this is a priority and how it benefits the family and the child. The child will need a connection to the goal. It does not have to be a big one, just true. For example, a new refrigerator will allow you to get water by yourself, the new oven will make it easier to bake cakes, the addition of an island will let you sit up and watch us cook dinner. Then share changes, such as one parent will be working more overtime, or we are going to watch more movies at home this year, or we are not going to the beach this summer.
Don’t be afraid to tell a child “no”, or to set dollar limits. If your child has been invited to five birthday parties, they do not have to attend each one. Time/Effort management is a skill that will need to be learned so start helping them now. Have you set up a budget for gifts? If not, now is the time to do that. You may want to give gifts of activities (sleepover, fishing outing, beach walk) or that are crafted by the family. Over extending your expenditures beyond your income or budget will cause you to reduce spending on other priorities or increase credit debt. As a parent you know the attention span children have with toys, so for another child’s birthday gift, start a conversation with the other parents. Be creative in setting up objectives and expectations for the celebration. Be an example for responsible parenting. Not letting your child recognize constraints, may be easy today but will be harder in the future.
When it comes to participation in things like school activities, educational, cultural and sports events, consider your income and time parameters. What can you sustain and maintain? Children need exposure and to experience many opportunities. As a parent you help them balance their options with affordability. The price or affordability is not only in dollars, but it is in time, sleep and the ability to put forth the effort required. It is a judgment call on the parents, as the children begin very young and as they mature. Have a conversation with the child after you have determined a financial budget. What choices financially and time wise can you offer the child. Do not make an offer to the child or encourage them if the cost will hurt your ability to cover your expenses and needs such student loan payments, funding your retirement, saving for the child’s college or even taking the family on a vacation. If taking dancing or riding lessons, or being part of a sports activity means readjusting the family objectives, share that info with the child. Adjustments may be something like only one camping trip this year instead of two or reducing party or clothing budgets. Unless your income has increased or expenditures in other areas have decreased, adding the expense of additional activities funding has to come from your current resources and an adjustment will need to be made. Prioritizing objectives with consideration to adjustments financially, emotionally, and time wise is teaching your child life skills.
This article appears courtesy of Nancy J. LaPointe, MBA, CFP®, ChFC®, CLU®. Nancy is a Senior Financial Planner offering fee-based financial planning services through MetLife Securities, Inc., a Registered Investment Adviser. She focuses on meeting the financial needs of individuals and business owners. You can reach Nancy at the office at 4520 Intelco Loop SE, Suite 1E, Lacey, WA 98503 or at 360-236-0312. Insurance and annuities offered by Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Securities products offered through MetLife Securities, Inc. (MSI), member FINRA/SIPC, New York, NY 10166. MLIC and MSI are MetLife companies. L0212238209[exp0313][WA]
