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God expects us not only to learn to handle our money according to His instructions, but also to share that knowledge with our children. So what are some of the ways parents can teach their children to handle money responsibly?
Children are a gift from the Lord; they are a real blessing" (Psalm 127:3, Good News Bible). In the New King James Version's wording, they are "a heritage from the Lord." What a wonderful privilege it is for parents to raise the next generation!
When God delivered Israel from slavery in Egypt more than 3,000 years ago, He was interested in the future of the adults as well as their children. He wanted the Israelites to take root in their new land and prosper for many generations. That's why He repeatedly told the Israelites to teach their children what He had taught them (Deuteronomy 4:9-10,40; 5:29; 6:2-9; 11:18-21).
When we learn to handle our finances according to God's instructions, He expects us to share our knowledge with our children so they, too, can be blessed. With God's perspective in mind, let us consider some ways parents can teach their children to properly manage their finances.
How early can children begin the process of learning about money? There is no set age, but experience indicates that as soon as they learn to use money they can learn fundamental principles about managing it.
Modern marketing efforts, for example, do not exclude children. Children's television programs typically contain advertising aimed directly at youngsters. Advertisers work to create desire for toys and other products.
Since children are exposed to advertising and experience desire for various material goods early on, it makes sense for them to also begin learning about money management. Understanding basic monetary concepts can be a valuable blessing that lasts a lifetime.
Money to work with
Children can begin to learn some principles of financial management if parents are willing to invest the time it takes to teach them. One way parents can help is to give children a little money to work with. This might be through a small allowance or perhaps payment for certain tasks done around the house. Even small amounts of money can provide important opportunities for teaching valuable lessons.
When children receive money, help them learn to manage it by depositing it in a safe place such as a toy bank, a wallet or even a jar. Furthermore, this is an excellent time to teach them God's principles of tithing. Have your child put aside tithes in a separate container. Each time children receive income, they should be helped in the practice of figuring and setting aside tithes. They can also count what is in their bank each time they add to it.
Opinions vary on whether children should receive allowances. Some feel it's good to give a small, set amount on a regular basis. Others, however, believe that regular expectation of a gift can lead to an entitlement mentality. For this reason, many tie allowances to chores-as payment for work.
Whatever approach a family employs, the real value for young people lies in learning to manage income and seeing that work has its rewards.
Financial planning
To lay a simple foundation for budgeting as an adult, children can learn to evaluate and plan their purchases. One way to do this is to have children make a list of items they would like to buy. These may be small items such as stickers, snack foods or special toys. Parents, of course, should monitor choices to make sure they are safe and appropriate.
The next time you go to a store that carries the items on the list, have your child record the prices. When back at home, have him count his money before discussing which items might be purchased now and which will require more savings. Let him decide if he wants to purchase a less expensive item on his list or wait to accumulate more money for a costlier item. When he is ready to make a purchase, take him to the store and help him count out the money to make the transaction.
While at the store, it's not uncommon for children to decide they want something that costs more than they can afford. When this occurs, loving parents will generally decline to provide the extra funds. It may seem like a tough lesson for a child to learn, but many things about life are better learned early when the consequences are minor. The same lesson applies when children spend all of their money on one item and then have no additional funds for other things they would like. Experience is an effective teacher.
As children become more conscious of time, parents can point out how long it will take them to accumulate the same amount of money in their bank again. This teaches the valuable concept of planning for purchases.
This process does take time and effort, but the result is worth it. Children who learn to manage money at an early age will be spared some hard lessons later in life when the consequences are greater.
Older children
As children mature, they can be given the responsibility of purchasing certain personal items. Some parents find it helpful to give their older children a clothing allowance at regular times throughout the year-such as the beginning of a school year.
They allow their children to choose the clothes they want to purchase with that money, as long as it fits mutually agreed-upon style guidelines. Although poor choices can lead to a limited school wardrobe, this, too, can be an effective teaching tool. It's better to let children live with the consequences of their decisions at this age than for parents to bail them out financially and deny them the opportunity of learning a valuable lesson-setting them up for difficulties later in life.
Saving money is another important concept parents need to teach their children. One way to do this is to open a savings account in the child's name. Depending on a parent's expertise, older children can also be taught about other types of savings and investments, such as money market accounts, stocks, bonds, mutual funds and precious metals.
Teens can learn how to evaluate these kinds of savings and assets and track how much they are worth. They can also come to see the benefit of compounding interest and learn to set aside funds for the inevitable emergencies that occur in everyone's life.
Another especially important area older children need to understand is credit, including its benefits and potential pitfalls. Regrettably, many adults have not yet learned these lessons. If you have learned to use credit wisely, teaching your children this information will put them years and likely thousands of dollars ahead in life.
It is also wise for older teens to learn how to plan for retirement. Proverbs 13:22 says that a good man leaves an inheritance to his grandchildren. This means there must be some forethought and planning about finances to provide for one's needs later in life. Those who begin putting funds into a retirement account early in their working careers usually see their retirement funds grow to values much larger than those of people who wait until their 40s.
Some adults have been shocked with an alarming wake-up call in their 40s or even 50s when they realize they have not sufficiently planned for their retirement years. Wouldn't it be much better to have learned that lesson and been educated about the importance of planning for that stage of life while still young? The best time to plan for retirement is at an early age when investments have more time to grow.
Companies offering financial products sometimes offer financial advice and assistance to young people. However, such advisers often have a sales agenda, profiting from your selection of certain investments. Popular financial experts recommend seeking out personal financial advisers who sell no products. These must be paid, but their advice is far more trustworthy. Also, you can do your own research. There are many books on the market to help in putting together a financial plan.
Children are blessed when they have parents who love them and teach them how to manage their money. The training children receive from their parents will stick with them throughout their lives (Proverbs 22:6). Take this to heart and teach your children the principles of money management. You and they will be blessed by your efforts.
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