Mother, Mentor, Teacher – How to Raise a Money-smart Child

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The solar system, long division, compound words. It’s back-to-school time, and there’s learning in the air. Not everything worth knowing is taught in every school – like money smarts, for example. That may fall squarely on your shoulders if you want to raise a money-smart kid.

Only 14% of teens have taken a personal finance class in school, but 76% say they want to learn about the basics of finance now to help them make better financial decisions down the road.1 Unfortunately, today many young adults say they know more about their iPod than how to file taxes, save or invest.2 It’s never too early to start building the basics.

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Here are three financial building blocks that will help get your child started down the money-smart path:

  1. Set financial goals. Is it really important for an 8-year-old to set goals with his or her money? Resoundingly, yes. When children (just like adults) have goals with their money, they immediately become more focused with it.

    You can talk about both short- and long-term goals and ask your child to come up with some. You may be amazed at his or her thought process. Sharing your own goals signals that it’s not just something you say, it’s something you do. And it’s important.

  2. Use self-discipline. Very simply, self-discipline means to learn to delay gratification so that you can work toward long-term goals. This is especially hard for children, but building the practice now with “a dollar here, a dollar there” helps establish healthy habits when the stakes are higher.

    This is an opportune time to discuss the difference between needs and wants, definitions that once explained are understandable to even younger children. This is a critical step, but unfortunately many parents don’t discuss these concepts with their children.1

  3. Make wise financial choices. Every time someone, even a child, chooses to allocate money, he or she has essentially four choices: save, spend, donate or invest. Start discussing these options so children learn that what they do with their money truly is a choice. Here are some strategies to discuss now with your child:
  • Save – Build a short-term goal, and spend money to achieve it. Without a goal, your child is less likely to save because he or she won’t be focused. Goals come first.
  • Spend – Create a list, and prioritize before spending in order to stretch the dollar. That may include comparing prices and looking for values.
  • Donate – Think about what is important and how to help improve that. Helping to buy food for the puppies at the shelter or books for underprivileged children can lead to a sense of empowerment for children and a lifetime of philanthropic responsibility.
  • Invest – Identify a long-term goal, and save toward it. This helps your children understand that small, regular savings now can make their long-term goals attainable.

Start today to make a difference in your child’s understanding of wise choices with money:

  • Set aside some quality time to review the concepts with your child. Like anything worth learning, it will take practice and mistakes for true learning to occur.
  • Provide opportunities for your child to practice, and discuss options and choices.
  • Review your child’s choices regularly, and acknowledge progress. Your approval for a job well done is immeasurable. And your support around disappointment over a hasty choice fosters learning.
  • Model good money smarts. Explain your everyday financial choices. For example, the generic cereal allows you to also buy a pack of gum. The money you’ll save by not buying ice cream will go into next summer’s vacation fund. The check you’re writing supports your favorite charity.

Raising money-smart kids is not rocket science. But it doesn’t happen by itself, either. Take charge now by teaching these basics. You’ll be giving a gift that endures through many ages and stages.


1 “Capital One’s Annual Survey Finds Back-to-School Shopping Will Be Impacted by Economy,” PR Newswire, July 21, 2008.

2 “Preparing for Their Future: A Look at the Financial State of Gen X and Gen Y,” American Savings Education Council and AARP, March 2008.

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