Teaching your kids to handle money well is a life skill that will be a daily part of their future lives. But how can you set them on the right path? Maybe you’re great with money but don’t know how to pass that down, or maybe you feel inadequate and don’t want your kids to make the same mistakes. What can be done?
I don’t know how to do it, but I’ll tell you what my parents did. And both my brother and I only have mortgage debt (he’s a social worker!) have retirement accounts, and well – I write about personal finance for a living. So, they must’ve done something right, right? I won’t claim to know the instruction manual, but I’ll tell you a format that worked out for my parents. It was a mix of intentional and just living life. So let’s first talk intentional things you can do. I credit this with 30% of the puzzle.
Formal Learning
Give, Save, Spend with Piddly Money
Maybe your kids earn an allowance, maybe they do chores for money, maybe they sell lemonade by the street. Remember that story from the Bible about the widow’s mite? She gave what would’ve been a “piddly” amount of money in that time, but Jesus gave her the gold star and said hers was the example to follow because it came from such a pure place. What could be piddly-er than the allowance income of a small child?
Growing up, my brother and I both earned a few dollars a week, and I remember the instructions from my parents to divvy it up in three separate places: giving, saving, and spending (10%, 20%, 70%). That meant a $10 allowance would be split into giving ($1), saving ($2), and the other $7 could be used however I saw fit. And that meant candy. All the candy.
As you think about your kids, consider what that intentional allotment might look like. You might end up carrying a bunch of single bills (oi), or maybe just use a wall chart board with totals, I’m not quite sure. But what this exercise teaches is to have the first interaction with money include an element of giving. Sure, it might take a long time for that lesson to fully bake (like it did for me), but you’d be encouraging the habit which can be difficult to pick up later on. It’ll make generosity a more natural action when their earning potential increases by thousands of percent.
Encourage Investing and Let Them Fail
Have you ever thought of guiding your kids through investing? In ninth grade, my parents gave my brother and me some money (think, roadtrip vacation size) to invest. We researched and told them our picks. I picked a single stock company, so did my brother. Hershey and Pepsi (I liked chocolate, he liked fizzy drinks), then the money got invested and we were instructed to let it sit and grow to be a boost for college. It flopped massively (this was 2007 after all), but it taught me a really powerful lesson about the stock market–that it comes with real consequences, but that I could be a part of it too. The first time is always the hardest with any new skill–and I took the first step of investing in a safe, guided space.
Use Incentives
Your kids probably want something. And you have the power to give it to them. Parents are generally whizzes at incentives. Want your kids to handle money well? How can you incentivize financial literacy?
When it came time to drive, my parents put a requirement in place before I could take off in my ticket of freedom. I had to read the Total Money Makeover by Dave Ramsey. If you have a teen, there might be a more fitting book (I’d actually recommend The Millionaire Next Door, The Wealthy Barber, or the Psychology of Money. All just fantastic). But point being, I absolutely devoured that book. I wanted to drive! And I couldn’t tell you what I learned from that book, it didn’t change my life or anything, but it was one more input, one more inflow of good financial knowledge. And besides, when else would I have read that book? Never. The answer is never.
Keep Their Skin in the Game
Parents often waffle back and forth on how much to financially support their kids. Do they stay on the cell phone bill? Do you front the movie tickets? Do they pay for college?
I’m not going to pretend to know how you sort any of that out, but I do know that having skin in the game was very important for me to change my behavior. It does go back to that incentive thing. My parents were fortunate enough to offer to pay for three years of college, and that last year was on me. I realize this is such a privileged position, and I’m not meaning to gloss over that fact. I wound up at Taylor University, with my parents dealing with the first three years of college, and I knew that fourth year was looming with a hefty price tag.
But that’s the thing, when I knew I was on the hook, I did things differently. I hustled through summer classes at a cheaper community college to graduate a semester early and save some money. I had a terrifying conversation with my soccer coach asking for an exception on my small soccer scholarship to frontload the year’s payout into the first semester. If I wasn’t responsible for that year, I wouldn’t have done any of those things. In your own family, you’ll have your own version–maybe your kids pay a portion of a sports league, or cover their own discretionary spending. I don’t know. But you will!
Informal Learning
Good news, you don’t have to expend a ton of energy in formal learning if all that listed above just seems like too much work. Most of your kids’ learning about money will come from your own interactions, attitudes, and habits around money.
Focus on Your Own Financial Habits
Are you a family that always orders drinks at a restaurant? They’ll assume that’s how you do it when they get to adulthood too. Never order drinks at a restaurant (or never go out to eat)? Your kids will assume that’s normal if that’s how they were raised.
Your family has its own unwritten set of rules and habits your kids will absorb around money. So instead of trying to put forth so much time and effort into teaching them how to handle it, just focus on your own financial habits and financial health. Are you living below your means? Would your kids ever see you giving money or resources away? Do you have money habits in place that lead to a calm financial life? That stuff gets absorbed with a lot more sticking power than formal training ever does.
Focus on Your Own Heart
The same thing happens with your heart as with your habits. Your kids will sense if you have an anxious relationship to money, a scarcity mindset around money–and likewise, a generous posture, or contentment and stability with your finances.
If you haven’t been rocked into the world of realizing it’s not your money anyway, it might be time to do some rocking. I recommend taking a Crown Financial class or Randy Alcorn’s book Money, Possessions, and Eternity or perhaps The Treasure Principle. Or really, just spend some more time reading the Bible. It’s chock full of money-related content.
Let Them Find Their Way
Assume there will be stops and starts. Assume there will be poor choices. Remember, my parents had to watch me invest in Hershey and lose half of its original value. But eventually your kid will fly the nest, start getting big-kid paychecks, and start finding their way in the world. You’ll be just a short call away once it's time for them to choose their health savings plan, or their workplace retirement plan, you’ll be the safety net when they didn’t realize how much first, last, and security could be and then the car breaks down.
Think about your kids' future lives–where they don’t just handle money well, but they keep their hands open. And instead of a few dollars getting offered up from chore money, it’s a few thousand dollars going to their local church, or that summer camp when they learned how good Jesus can be. Eventually, it’s a few hundred thousand dollars going to things that make the beauty of the Kingdom a little more tangible here on earth. And that’s what parents hope for their kids, right? To raise people who are kind, generous, and add more goodness to the world. That’s pretty cool to think about, huh? Oh, and pray for them. Praying always helps.