Budgeting, Part 3: Instilling Money Values in Children and Grandchildren

Children ColoringMoney values can be a guiding light that is a component of your legacy. If communicated frequently and purposefully, these values can be an important reference for your loved ones as they learn to handle money.






The Key Takeaways
o Having regular family discussions about household finances, shared money goals and general money concepts will, over time, communicate your values to your children and help them learn to be financially responsible adults. These discussions can also bring family members closer.
o Even young children can learn about setting spending priorities, working within a budget, saving for a larger purchase, and giving to others.



Family Meetings About Money
Money discussions can start when children are as young as ten years old. While there is no need to go into detail about income and specific expenses, you can explain that there is only a certain amount of money and everyone needs to be careful with how it is spent. You can talk about your budget in general terms and let them know that some things, like housing and food, are at the top of your priority list. You could let the family decide how to spend the monthly entertainment budget or which charity (or even a friend) should benefit from your giving budget. You can discuss where to go on a family vacation and how everyone could help save money for it. And, by your example, you can illustrate the importance of saving.



As your children mature, you can start to teach them money management principles–how to balance a checkbook; how credit cards work; how companies make money; how simple and compound interest works; how to make and follow a budget.



What You Need to Know
Parents often don’t want their children to know how much or how little money they have. But kids spend time in other kids’ homes, and they are quick to pick up on the differences. How you earn your money–and how you prioritize spending, saving and giving–says a lot about your values. Talking about this with your children and including them in the process will help them learn your values and guide them as they mature.



Actions to Consider
o Create a plan to purchase an item for your family, like a new TV or camping equipment. Include your children as you shop and compare prices in stores or online. Figure out how much your family would need to save each month to reach your goal, and encourage everyone to find ways to save. This will show your children how to plan to make large purchases without going into debt.

o Give your children allowances so they can learn to handle their own money. Some families give each child a small allowance just for being part of the family, with opportunities to perform household chores to earn more. You could give teenagers their clothing allowance for each school semester and let them make their own purchases. However, resist the temptation to bail them out if they overspend and run short of funds–you want them to learn responsibility and make smarter purchases next time.

o Have monthly family meetings. The regular frequency lets everyone feel they are truly involved with the family finances, gives them opportunities to ask questions, and lets them see progress and make adjustments in spending.

o If you see your finances are going to suffer (for example, if you are laid off or incur unexpected medical expenses), let your family know right away so they will all understand the situation. They may even have some creative ways to help cut expenses or increase income.