Apr 9, 2015

Equip Parents to Teach Their Kids About Money...3 Tips

Not knowing how to manage finances is a source of stress and even divorce in many families.

One of the best things you can do to help families is equip them in this area of their lives.

Last fall, we led thousands of our parents through Dave Ramsey's Financial Peace University.

We also gave them tips they can use to teach their kids about managing money.

Here are 3 great tips from Dave to help parents teach their kids about good financial practices.

Offer a commission to your kids instead of an allowance.  The word "allowance" means you make an allowance for someone because they are not able.  Instead, instill drive and dignity in your child's character and make sure they know they are able.

Kids do not develop those qualities when you hand them everything.  Life will not make allowance for you, but it will pay you what you earn.  It is crucial kids understand that money comes from work.  It doesn't come from Mom and Dad's pocket.  So, they need to be paid a commission.  When they work, they get paid.  If they don't work, they don't get paid.

Chores need to be very age appropriate.  When they are 6, they may help match socks in the laundry.  When they are 12, they may be expected to empty the dishwasher.  The older they become the more responsibility they can handle and the more chores they can take on, which in turn means making more money.

Teach children to spend wisely.  Have three envelopes for your kids.   The envelopes should be labeled Give, Save and Spend.  Have a payday once a week where you pay their commission and help them divide among the envelopes.

Teach children how to save.  When a kid saves money, it is not a mathematical event; it is a maturity event that gives dignity.  Help your kids set a goal and learn to delay pleasure while they save to reach that goal.

Children need to learn to save up for things they want so they experience the principle of delayed gratification.   There are a lot of great life lessons to learn through the process of saving.  Every teenager needs an emergency fund of $500.  This is really their cushion between them and life.  So if a tire goes flat, a cellphone breaks or any "teen-sized" emergency comes up, they have money in the bank to use and don't come running to their parents.  This gives them responsibility and a sense of independence as well as prepares them for when they leave home to have money set aside when emergencies happen.  

If parents can teach their kids how to steward money when they are young, it will set them up for a life-time of financial success.

As a children's ministry leader, our job is to equip parents and give them the tools they need for this.  A great resource to get into the hands of your parents is Dave's book - Smart Money Smart Kids: Raising the Next Generation to Win with Money.

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