When writing my Wall Street Journal bestseller, Your Kids Are Your Own Fault: A Guide For Raising Responsible, Productive Adults, I did my own internal survey among my facebook fans, friends and followers and my database.
I asked the question of nearly 50,000 people: “What is the one thing you wish your parents had taught you that they didn’t.” I received nearly a thousand answers.
Ninety-nine percent (an overwhelming majority) of those answers said the same thing, “I wish my parents had taught me about money.” So do I.
Part of the reason people are in the mess they are today, part of the reason our country is in the mess it is in today, part of the reason the housing market is in crisis, part of the reason debt is up, bankruptcies are up and saving is down is because parents didn’t teach their kids about money and finances. Maybe it is because their own parents didn’t teach them about money either, or because they simply didn’t have the skills to pass on, or because they thought their kids would just “pick it up” along the way or develop good money management skills by osmosis – I don’t know.
But the bottom line is that people don’t know much about money and it is a parent’s job to teach them while they are young so they will have good habits when they are older and hopefully, independent.
12 Money Lessons
While there is no way to go into much detail about what you should be teaching your kids about money how to teach them in a blog posting (you have to read the book for that) I want to give you some key points to consider:
1. Give your kids an allowance.
Give the same amount on the same day every week. Just like you get your paycheck. The allowance is for them holding up their end of the family responsibilities: picking up their stuff, helping around the house, getting their dirty clothes to the laundry area, carrying their plates to the sink . . . age appropriate chores any kid can and should be doing to contribute. This allowance is paid regardless of how well the job is done. When a boss isn’t happy with performance, he doesn’t withhold the salary but instead counsels the employee about their performance. The same rule applies to kids and allowance.
2. The 10-10-10 Rule.
Save 10 percent. Invest 10 percent. Give 10 percent. Live on the remaining 70%. This lesson can be taught to any child at any age. And since about 40% of Americans live on 110% of their income and only about 7% have enough money saved for retirement, it is a good way for parents to live as well.
3. Involve your kids in household finances.
Explain how everything costs money and about your household budget. Cover income and expenses and how it all works and how you manage it. Again, age appropriate of course. Kids need to see and understand that everything comes with a price tag – even the lights and the hot water.
4. Encourage entrepreneurship.
Teach your kids how to make money. Kids can mow lawns, babysit, dog walk, pet sit and more. Teach them about customer service, sales, management, cost of goods sold and profitability with each thing they pursue. Teach them to save, invest, be charitable and enjoy the money they earn.
5. Teach math skills and their relevance to money.
Addition so they can add up what they have and what they owe. Subtraction so they can subtract what they owe from what they have. Pretty basic but I promise most adults have not done that simple equation I just described. Also teach percentages and multiplication. Studies prove that the better you are at math, the more money you end up with in the long run. Your kid may hate math but they love money so teach that one goes with the other!
6. Teach about credit and interest rates.
Age appropriate again but the sooner the better. Don’t let their first credit card experience be their teacher!
7. Wants vs. needs vs. can’t-live-withouts.
Great lessons for everyone for sure!
8. Money is good.
There is more wrong about not having money than with having money and anyone who says differently has never had money and probably will never have any. It takes money to build hospital and help people in need. You can’t do a damn thing for people when you are broke! Poverty is the enemy – not wealth.
9. Money is not more important than people.
10. Money gotten dishonestly is never worth it.
11. Money carries responsibility.
12. Money is freedom.
The freedom to do what you want, the way you want, when you want and with whom you want. That is the ultimate benefit of having money.
If you do all of these things will your kid grow up to handle their finances perfectly? Maybe and maybe not. There are few guarantees with parenting. However, don’t do these things and you hinder your kids and impede their overall success in many ways. All the best to you and your kids!
“This post was originally published for my weekly column at DebtKid.com. You can find the original post here.”
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Boy, you said it Larry. Painful lessons easily avoided.
7. Wants vs. needs vs. can’t-live-withouts.
So very true. I think this one lesson could shift so many things for so many people. I myself have cut my “wants” spending to almost nothing.
Yes, I order a pizza once a month. I spent $80 on a turntable for myself. I go to the bar once a week with close friends and spend less than $10. Otherwise I pay bills and buy food.
Eliminate the “want” spending and you’ll be amazed at not just how much money you really have – but how much stress you can eliminate from your life.
Bravo, Larry! There’s one more really important one that I teach that you have emphasized in your books and on Big Spender: You don’t deserve anything you don’t have money for.
And a sub-lesson of #6 I reiterate at home: Earn first, then buy.
I bought an XBOX360 ages ago, and we went in half on a Wii. My then 9 year old son wanted a PS3 for ONE game, and I said he had to save for it. Now he’s 11 and even though he has saved enough, it took so much effort that he doesn’t want to spend it on the PS3. I then showed him on paper how much he would still owe me had I bought it up front and loaned him the money (like a credit card). He said, “Wow, that’s just not worth it.” Lesson taught and (hopefully) learned.
I’m hoping that the next generation teaches a little more responsibility and a little less dependency. It’s feeling a little like 1928 to me lately. . .
i was never taught about money from my parents who never had a thing while i was growing up.
i will print this advice from Larry for my daughter who is 9.
She just trashed something at book fair today…15 bucks….she makes 50c on each ‘behavior buck’ she earns…..She is big time in debt now…..at 9 LOL
I could not agree more about teaching your childern about money and how to handle it. I however was NEVER taught about it or on how to pay bills, the way I was taught was through my wonderful wife who is an accountant by the way. ever since I’ve been married we have never had money problems thank God as well as my wife lol. anyway we did show our son about saving money and we also give him an allowance as well not much and thats because we want to show him that it’s not as easy to earn the money as it is to spend it. when he gets money from birthdays or Christmas we make sure that he saves it for something important that he might want and not to spend it just because he has it. we also make him pay for different things such as dinners, movies, or shooting pool if these things are what he wants to do so that he can see for himself how expencive life really is. thank you for this artical because again I could not agree more that parents really do need to show their children about $$$$$.
On-target, as always Larry! Number 8 reminds me of the line from Sophie Tucker, “I’ve been rich and I’ve been poor; rich is better”.