Train up a Child
By Michelle P. Sharrow, MBA
The best way to bring about meaningful change is to make generational changes. In the U.S., 93 percent of all financial wealth is controlled by a meager ten percent of the population. This means there is much work to be done by the remaining population. The best way to change this dynamic is through the next generation. If we arm them early and consistently with information about budgeting, saving, and investing, we can make a difference.
When is the right time? It’s never too early to start. If your child regularly receives cash from relatives, now is a good time to start. You can also begin as soon as you start to give your child an allowance or regular stream of money.
How can you teach them in a meaningful way? What you demonstrate through your every day actions is just as important as what you reiterate in weekly or monthly conversations about money. How much you have is not as important as showing how you actually use it.
Be honest by inviting your child to sit down with you as you work on the household budget. Gauge the maturity level of your child when deciding that the time is right. Generally, this exercise might be best saved for an older child – preteen and up. Show them how much money is coming in and the cost of nonessential services like cable, gym memberships, and extracurricular activity fees. Most importantly, show them your bottom line after everything is paid each month. It is important that children know how much it cost to live. Not only so that they can begin to appreciate all that you as parents sacrifice to provide for them, but also so they’ll have a realistic picture of the type of lifestyle that is achievable for someone who is new to the workforce – whether that is fresh out of high school, college or graduate school.
Another point to teach is the importance of making wise purchasing decisions. Help your child develop habits to plan for big purchases and comparison shop. An ideal time to do this is when your child wants a big ticket item such as an electronic device. Sit down with your child to show them where it can be purchased, how much it cost, and how much they need to save to purchase it. You can develop charts or graphs that show weekly or monthly progress towards the goal.
Stressing the importance of saving is just as important as developing a habit of paying obligations on time. Everyone should save at least 10 percent of their income a month. For some this is achievable, for others it is not. No matter how much you save, the key is to consistently put something away. If you help your child develop a habit of saving at least $5 a month; you will ensure that he is $60 richer in December than he was at the start of the year (assuming a January start).
Shame keeps us from sharing valuable experiences and life altering lessons with our children. Don’t let shame keep you from positively shaping your children’s financial future. Form habits that show you care. Shape their lives by sharing your budget and your decision making process, too.
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