While growing up I remember parents always complaining about the schools not teaching children how to balance a checkbook. While it's a very different world, we still share a similar problem. Our children have no idea how to handle money well.
Whether the poor habits handed down from parents or the rat race job mentality pushed onto us by society, handling and generating money is not a skill mastered by this generation.
But we can change this for our children. And for ourselves. My daughter has a chance of starting life without ridiculous college debt, a Nordstrom credit card and the lack of skills to make money on her own. As parents (or soon to be), we clearly understand good habits are taught by example. This makes all business transactions with vendors, banks, business partners and even appropriate world news, teachable moments at a young age.
According to a recent study by the University of Cambridge, money habits are formed by age seven.
3 Money Habits We Must Teach Our Children:
#3) Entrepreneurship – 91% of people are employees not because they missed the “entrepreneur gene”, but because our education system doesn't teach students to be self-employed. In the world of finance, the most effective tool you have is encouraging your children's ideas. You might even consider asking them about their experience with a business: the quality, the environment, and the employees.
Furthermore, if your child enjoys something, encourage them to find ways to make an income with it. It's these simple moments and skills that give children the risk threshold and permission to pursue entrepreneurship. Let them fail and learn in their youth, and you will only see them succeed faster in the years approaching adulthood.
#2) Saving Is Non Negotiable – Our desire for quick, fast, and convenient is the cause for our debt and enslavement to lenders. We have no patience. We have no discipline. We must train our children not to rely on instant gratification and move toward planning and the endurance of earning money to buy items in full. Children who save for toys or observe their coins stacking in a piggy bank (or savings account) will learn the value in not spending their money so easily.
#1) Investing Doesn't Have To Be Complex – The word “investing” sounds like something I need to read a book about before I participate. But we make investments all the time. The homes we buy, the businesses we start, the banks we use, and sure… the stocks we pick. But let your child share in the experience. Even as a toddler, allow your child watch how you communicate in business transactions and teach them (to the best of your ability) why you made the decisions you did.
As your children grow older, teach them about buying low and selling high and the value in making an honorable deal. Allow them to watch stocks of companies your family may support and maybe even give them an allowance toward some small investments.
Teach your children to produce more than they consume and spend less than they earn. Reinforce that money is the means, not the end. We work to live, not live to work. Family, love, travel, freedom, health, and memories are the real wealth in this life.
What do you wish your parents taught you about money? What else would you teach your kids?