It's crucial to teach your children the ins and outs of money management and financial responsibility.
Everyone views smart financial practices differently, and what's an effective strategy for one parent doesn't necessarily work for another. While there's no official rulebook, consider these five ways parents can become better financial role models:
1. Be open about your financial situation. Although children like sweets, you don't have to sugarcoat the truth about your family's financial standing. "Teach your kids about money from objective reality,” says Steve Siebold, author of “How Rich People Think.” “It's a nice thought to say everyone – regardless of financial status – has access to all the good things in life. Its also naïve and untrue.”
Instead of trying to shield your kids from your household budget, include them in the decision-making process on when to save and when to spend money.
2. Take a hands-on approach. The earlier you can teach children about money, the better. Andrew Wang and his wife introduced the subject to their kids as soon as they started asking for things. "We have encouraged our preschool-aged children to touch money, identify different denominations of money, play with and count money,” says Wang, an investment adviser and father of three in Mendham, N.J. “By opening up the conversation early and keeping it going as kids grow, we hope to raise financially-savvy kids."
From counting pennies in a piggy bank to teaching your teen how to balance a checking account. letting your children take control of their finances in some capacity – no matter how small – can heighten their confidence about using money appropriately.
3. Emphasize the importance of earning money. Many parents strive to teach their children they have to put in effort to earn money. Some default to the common arrangement of doing household chores for an allowance, but doing so runs the risk of teaching kids they only should clean their room in exchange for money.
Erickson, a resident in New Mexico and father of four boys, circumnavigates this issue. "The boys do not get allowances, but they will do small jobs for people in the neighborhood or have minimum wage jobs," Erickson says. "Since the two oldest drive, they have vehicles and are responsible for putting gas in the car and paying for routine maintenance. This makes them realize they have to budget, and if they drive too much, they have to refill the car with gas."
4. Have a healthy relationship with money. Children – especially young ones – pick up on behavioral cues and attitudes faster than you may think. If you grimace every time you receive your monthly credit card bill or moan when taking out your wallet to pay for something, they may start associating money as painful and problematic.
Chris Miles, founder of financial adviso ry company MoneyRipples.com, says money should be a positive conversation. "When parents talk about money like there's never enough or a 'necessary evil,' my experience has shown that those children grow up hating money and struggle with it throughout their lives," he says.
Miles adds, "The first thing I do on a daily basis is to avoid phrases like, 'We can't afford it' or 'We don't have enough,' and instead use more truthful phrases, such as 'It's not a priority right now,' 'I don't think it's worth the price' or ask questions like, 'What can we do to find or earn the money to get that?'
5. Don't do it on your own. Teaching kids good financial habits can be challenging, as it often requires a lot of time and effort. In addition to being a good financial role model yourself, connecting your kids to other people who have a positive relationship with money can strengthen how your children will handle money in adulthood.
Jennifer Calonia writes for www.GoBankingRates.com, your source for the best certificate of desposit rates, savings account rates, personal finance news and more.