How to Shape Your Child’s Money Personality

Children need our guidance for everything they do. Children cost us a lot of money and it seems they always need something, even well into their college years. You may not think of fiscal responsibility when describing your children’s needs, but this too is something they’re going to learn from you — whether you intend to teach them or not.

It’s important to start teaching financial responsibility to your children as soon as they start noticing and asking about money. It is common for children to think money is plentiful and infinitely available. “Money doesn’t grow on trees,” we will all tell our children at one time or another.

How are they going to learn this? Regardless of your income, you should start teaching your children the value of money and help them develop financial responsibility. Here are a few ideas you can employ to help you accomplish this.

Create Want and Need Lists

Help your children learn the difference between needs and wants. Have your children identify things they need in life — like food, clothing and shelter — versus the things they want, like video games, electronic devices and spinners. Teach them that needs come first and that wants can be assessed and evaluated before purchasing anything.

Teach them about doing without in lean financial times and what compromises a limited budget might force you to make.

Teach Earning

Teach your children that money is not given, but earned. Let them learn the value of a dollar by giving them paid assignments in addition to their expected chores. Don’t overwhelm them. Give them something they can accomplish, like cleaning the yard up after the dog or raking the leaves into yard waste bags. Putting dishes away is a simple chore. Make it a challenging but reachable goal which pays off for them.

Teach Spending

Talk about wise spending and mistakes you have made. Share the story about blowing your crisp $5 bill on a stuffed rabbit you had to have on an impulse buy. Let your children know you can’t buy everything you want and show them some of the sacrifices you have made. Go shopping and look at things you would love to have but can’t afford, or that simply wouldn’t be a good idea to buy considering your budget.

Teach them that buying a car means buying gas, insurance, paying for maintenance and a host of other things they won’t automatically think to budget for.

Teach Saving

Buy a piggy bank or some other bank or jar to throw coins into. Have them guess how much money they have. Make goals for an amount to save. Help them identify something they can buy when they reach that goal. Counting money teaches them math skills, and the more they save, the less they’ll want to spend their money.

Teach them the importance of having an emergency fund for unexpected expenses, which will inevitably arise. If the money starts building up, go to your bank or credit union and set up their own savings account.

Teach Charity

Have your children go through their toys and clothes and determine which things they no longer want or need.

Talk about the potential use and appreciation still offered by the item and why it should not be thrown in the trash. Let your child decide to make the tough decisions. Practice this regularly to teach them to avoid clutter. Have your child accompany you to a Salvation Army or Goodwill to donate the items.

Encourage Work

You might pay them for doing a little extra around the house, or maybe you are a family which offers weekly allowances. At some point, a neighbor or friend may need a helping hand with some task they don’t want to do themselves. Shoveling snow from the driveway, cutting the grass, raking leaves and babysitting are common first jobs for children.

If you feel they’re ready and responsible enough to do such tasks, welcome the opportunity for them to earn money. This will give them a sense of accomplishment and further teach them the value of money.

Double Their Money

Perhaps your child has earned some money from babysitting or doing yardwork. Birthdays can produce a windfall of $20 bills from family and friends. Rather than watch all of that money get squandered on candy, iTunes gift cards and impulse buys, give your children a chance to double their money.

Offer to deposit all or any of the money they wish to save into their savings account and match it with your own funds. Let them work it out themselves. Let them decide whether giving up their money is worth doubling it for the future. Maybe they will come up with a plan to deposit half, so they will have the full amount in the bank and the rest to spend.

Whether you end up with a saver or a spender may not be entirely up to you. Children have their own personality traits and obviously inherit the best and worst from you and your spouse. As with any other lesson in life, all you can do is teach and lead by example. Help them make decisions, but try to make sure they’re deciding for themselves. This will teach them responsibility — financial and otherwise. Maybe your children will be role models for you some day.

Anum Yoon is a personal finance blogger and writer who runs Current on Currency, a blog for anyone who is seeking friendly money advice. 

James Hendrickson

James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek.  When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors.   James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College.  He loves individual stocks, bonds and precious metals.