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Teaching financial values and responsibilities early in life could prevent dangerous financial traps and promote positive money habits.


From personal experience with my own family members and friends, as well as my clients, it is very common among young adults and even grown-ups to have careless spending habits, to lack money-saving discipline and to be uncomfortable around financial planning altogether.


And it is really challenging for people to un-do this unhealthy attitude towards money and lack of money management skills as time goes by… which, in turns, may lead to unnecessary stress, relationship problems, loss of properties, inability to pay everyday bills and worries about future. The list can go on and on…


Have you experienced similar concerns with your family, especially with your children? Are you worried whether your children would be able to support themselves without your help? Are you confident that your child will be smart about money?


The answer really depends a lot on you!


It would be logical to think that most people get their money values from their parents. I say – Not necessarily! Although it is very beneficial for a child to see that his or her parents are handling financial matters responsibly, there are a lot of cases when financially responsible people were raised by financially disastrous parents and vice versa! That’s why I believe it’s important for parents to teach by example and talk with their kids about money. Further, I think that handing children money without showing them what to do with it could possibly leave them lacking in money smarts and teach them wrong values.


I believe you can help instill smart money values in children starting at a young age. Below are some strategies for each stage of a child’s development that can help you raise a money-smart child.


Ages 3 to 6: Make saving visual

You may think that teaching money values to a three-year-old child is a useless exercise, but experts suggest otherwise. The more you can “show” them things related to money, the more they will absorb. It is important to be creative about teaching them to save. The key is to make saving visual and very concrete.


You may begin by giving kids a small regular allowance but only if you ask them what they want to do with the money and help them plan how to spend it. Have them put the money in a piggy-bank where they can see it grow or use it to buy something. That way they can start to understand that money can get them what they want. This experience would help them build a foundation for more serious saving later on.


Make a game out of it: Use a clear jar for saving and tell your child that she must fill the jar up with her own money in order to get a specific toy she wants. Better still, put a picture of the toy on the jar as an incentive. Each time your child puts her own money in the jar (preferably coins), she can see her progress toward the “goal”. The idea is to connect the buildup of money to the desired toy.


Ages 7 to 10: Learn through trial and error

At this point, your kids are starting to understand what money can buy and learning the value of coins and bills. But they still need visuals to help them save.

So, suggest that they use different jars for different purposes and evenly divide the total amount of allowance they receive: use one for day-to-day spending, another one for “prize” items, and a third one for charity. Using these different jars would teach them about money planning, goal setting and different things they can do with their money.


This also would be a good time to learn about cost and to introduce the idea of having “enough money or waiting until you have it”. Go to do shopping together and talk about how you don’t have enough money to buy certain items now, but will be able to purchase it after you save more money. Modeling a delay in spending is very impactful for children.


Then let your child experience “not having enough money yet” on her own. Let her chose something that she can’t afford at the moment, but show her that in three weeks, for example, if she saves her entire allowance, she’ll be able to get it. This can be a valuable lesson: If you spend now, rather than save, you won’t get what you really want later.


Ages 11 to 14: Show a variety of purposes for money

Your kids are now old enough to understand that money can be used differently: saved for the long term (such as for a college), put aside for emergencies, spent on things they want, or donated to those in need.


Use a “multiple jar strategy” to teach kids a value of money – specifically, putting a certain amount of money away for different purposes. They might have short-term goals such as buying a new iPod or donating to a family in need, and longer-term goals like saving for a car or college.


The “jar strategy” will teach kids that savings aren’t meant for ‘leftover’ money. In fact, savings should come before any every-day spending. Make sure that you participate in planning how much of your child’s money will go into each jar.


For your child’s longer-term goals (e.g., a car or personal computer), you may consider opening a bank savings account that earns compound interest. Explain to you child a power of compound interest and savings growing thru compounding so that your child would make a habit of putting at least part of any money received (for birthdays, holidays, and special occasions) into a savings account.


It is a good idea to reward your child’s good saving habits! Try matching what she saves…For example, if your child’s goal is to save $20, you could add another $20 to her savings once she reaches that goal. This might lay the groundwork for more disciplined savings later in life, when your child reaches adulthood and earns a company match through a 401(k) plan.


Ages 15 to 18: Keep track

With college on the horizon, you need to set the foundation for budgeting. While kids may not be financially independent in college, they will likely have to manage their own money to a certain extent.


To make budgeting meaningful, the child should be earning some money—perhaps through an after-school or weekend job. Often kids are more careful with what they’ve earned than with money that is just handed to them!


Learning how to budget is a matter of building off what the older child has learned up to this point:


  • Money is a means to an end
  • Money has different purposes
  • There are always trade-offs


Keep it simple. Help your child write a list of what she has to pay for with her own money and assign a cost to each item (gas, clothing, entertainment). Split the list into needs (fixed expenses) and wants (discretionary spending), and then have your child try living on what she has budgeted for a few months as a “trial run” before college.


To raise a saver, you have to model good financial habits yourself and understand how to motivate your child at different ages. Above all, since kids learn by doing, let them have real money experiences—whether it’s setting and saving for a goal, or making the mistake of overspending and learning from it. These life lessons are priceless when they translate to a financially comfortable future.


To raising Healthy, Happy, and Money-Savvy kids,



Millen Livis

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