How to Raise a More Cost-Conscious Kid

Rusty on finances yourself? Here are 10 ways parents can help their children be careful and smart about their money, from expenses to savings.

Belt-tightening continues to be the topic du jour at many family dinner tables. Why not take advantage of economic challenges to teach children the value of a dollar? Financial experts offer 10 principles for teaching kids about money.

1. Talk about money.

Every time money is involved, parents have a chance to teach their kids the values and analysis behind their actions. Money should never be the primary topic of discussion, but it is one of the most important topics through which we communicate our wisdom and values to our children. Every purchase, investment or donation can be an opportunity to teach something about your values.

2. Talk openly about money.

Parents make a mistake when they keep information from their children. The only way kids learn what is or isn’t affordable is by the experience of what their family earns – and what items cost. Hiding this robs children of the financial education they need.

3. Talk factually about money.

Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping kids, they can cripple them from growing to make sound financial decisions.

4. Require chores; pay for optional work.

Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work.

5. Give an allowance kids can make real choices with.

Talking about money is important, but children need real-world experience to understand the consequences of their decisions. Consider giving them an allowance large enough that they can purchase some of their own wants (like comic books, extra clothing, lunch with friends at the mall, etc.). Then, continue to give them honest advice – and help them ask the right questions to make wise decisions based on their values.

6. Help kids prioritize purchases.

Ask them if this purchase is better than other purchases they are considering making.

7. Help children comparison shop.

Help them consider issues such as cost, quality and convenience.

8. Require kids to wait before making large purchases.

While it’s suggested that adults wait at least a month whenever they are making a large purchase, children shouldn’t be expected to wait that long. Here is a good rule of thumb: Kids should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week’s allowance). There is always tomorrow, and over half the time, they won’t remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.

9. Don’t use money as a punishment.

Your priority should be helping to give your values to your children, not to buy their outward behavior.

10. Don’t lend your children money.

If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are, “If they want it, they have to save for it. If you want them to have it, you will buy it for them.” Lending your kids money for items they want teaches them they aren’t responsible and they don’t have to prioritize.

This post was originally published in 2013 and is updated regularly.

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