I grew up in a very poor home. We had so little money that we were required to grow, fish, and hunt for some of our food, and I remember many nights where we had “mystery stew” and other such dishes that were made up of whatever could be thrown into a pot together. To put it simply, there was no money with which I could learn any fiscal responsibility because there was no money, period.
I managed to get into a good school and I wound up with a job that paid more in three months than my entire family’s income was for an average year. But the problem was that I had no idea what to do with the money, and I just went crazy with it, digging myself into a deep financial hole because I had no idea how to manage money at all.
Now that I’m learning good financial planning, my thoughts turn to my own child, who is approaching his first birthday. How do I go about teaching my son how to deal with money? More importantly, what can I do to keep him from making the same mistakes I did?
I’ve been reading several very insightful documents and books on this topic and they all seem to boil down to these essential points:
1. Show your children how you spend money. Take them shopping with them, show them prices on the shelves, and then talk with them about what things cost.
2. Allow them to manage a small amount of money themselves. It can be in the form of an allowance or some other form, but it should have clear limits and they should manage it themselves. Talk to them about how to manage it: should they buy a toy now, or save for something else?
3. Involve them in the finances of the house. Show them what you spend each month and demonstrate that you save each month. Tell them when there are financial problems and when there are windfalls.
My parents never really did any of the above, simply because there was very little money to be had and what little money we did have went into keeping the electricity on and food on the table. There was no such thing as savings plans, and the children weren’t involved in any family discussions.
I think that on my son’s fourth birthday, I am going to give him a piggy bank and start him on a small allowance and see where things go from there.