Thursday, July 9, 2020

Teaching Children Financial Awareness

"Dad, I really need that new baseball glove. My old one is just not working any more and the team is counting on me in the outfield. Can't you get me a new glove? I will pay you back." Such was the plea made by Stephen to his dad. Dad wasn't planning on a new baseball glove with this paycheck, and the utility bill was higher than he expected. And he realized that he had not done much to teach his children financial awareness. So Dad decided he needed to help his children learn more about money, so he devised a plan.

"Stephen, we are not going to get a baseball glove today, and this evening we are going to have a family night where we talk about the family budget and how we all need to be more aware of our resources."

That evening, Greg and Pam called the kids together and got out the play money from the Monopoly game.

"OK, kids. Tonight we are going to learn about our family budget. Every two weeks, from Dad's full-time job and Mom's part-time job, we bring home about $3,000.

So, we have put in this pile of Monopoly money $6,000. That seems like a lot, doesn't it? But then we have to take $1,900 for our mortgage payment. Do you know what a mortgage is?"

And on the evening went. At the end of the evening, the kids had a greater appreciation for the family's budget and why so many things they wanted had to be put off for another time.

Fathers have a big responsibility for helping their children learn to be aware of the value of money and to teach them the importance of financial awareness. Taking a pass on this important teaching responsibility can cause children later in life, as early as their late teenager years, to find themselves in debt and in trouble.

Here are some ideas about how fathers can help their children become more financially aware and prepare them to manage their own money.

Discuss finances at home. Like Greg did with his kids, take the time to explain where the money comes from to support the family and where it all goes each month. As the children learn to appreciate the family's budgetary limits, they will also learn the importance of staying financially solvent in their own lives. As our children watched us come up with ways to save money for a big family vacation or major purchase, they learned about what it means to be financially disciplined. It has been fun to watch each of our children come to grips with their own financial picture as they earn money and prepare to head off to college and manage their own personal budgets.

Help the children set financial goals. Most often, financial goals start when the kids want something and need to save for it. For our children, it was most often a bicycle to increase their mobility that was the first savings target. For others it may be the latest designer jeans or a cell phone. Take them shopping to compare prices and then help them use their math skills to figure out how much they have to save how often to be ready to buy the item. As they get older, you can talk about saving for college expenses, for school fees for the extracurricular activities they want to do, for a car or other larger ticket items. Helping them set goals and come up with a plan, and then track their progress can really help them learn to appreciate money and the need to save.

Develop an allowance system to help them learn about money. When kids have access to money they have earned, they tend to appreciate it more and they learn hard lessons about money when there is not much at stake. A good allowance system that balances between working to earn and being a responsible part of a family is a good place to start teaching money management. And whether they directly earn an allowance for chores done or whether chores are just expected and a modest allowance given, keeping track of what is earned, saved and spent will be the most important lesson.

Get them a bank account. About the time your children hit second grade or so, you should head down to your bank or credit union and set up a savings account. Getting their saved money out of the home makes them a lot less tempted to be raided for the latest whim. And as they watch the balance grow and see those few pennies of interest added, they will become more excited about saving. Just make sure you are also a signatory on the account so you can keep control of their assets if needed.

Don't give into financial demands. Children are notorious for going to the store with you and wanting a candy bar, a toy or something that attracts their attention. Be firm and don't give in. Those are moments when they learn the need for delayed gratification and to make choices for long term gain, even if it results in short term pain. Teach them the need to avoid impulse buying by setting the example yourself in their presence.

Share the pain of setbacks. When you experience a financial setback due to job loss, the need to replace a major appliance or another financial reverse, don't protect them from the consequences. Whether fair or not, life hands us financial reverses from time to time and it is good for kids to get a dose of reality. So you may have to put off a family vacation or a major purchase that they were looking forward to - they will learn the need for good planning and for adapting to changes in life.

Helping your children learn about money and how to be aware of financial situations that may confront you now and them later will help them learn to make good financial choices in their lives.