How Parents Shape Their Children’s Financial Decision

Today, we have a guest post by Christine, a finance expert and fellow mom blogger from Find Your Mom Tribe. She will share with us some parenting tips on how to positively shape our children’s financial decision.

Find Your Mom Tribe is a parenting blog with insightful information surrounding pregnancy, motherhood, and budgeting for moms. It even has a “Dad’s Corner!”

As parents, we have an immense opportunity to teach the next generation about money matters. The more equipped they are with financial literacy, the more wealth off our society becomes.

By the end of this guest post, I hope you will find inspirations to start the conversation on money management with your child/ren.

This post may contain affiliate links, which means I may receive a commission, at no extra cost to you, if you make a purchase through a link. Please see my full disclosure for further information.

Talking to kids about the birds and the bees isn’t easy, but teaching them how to handle money can be just as difficult. Some parents avoid money conversations altogether, but kids still learn by what they see and hear. We have a huge impact on how our kids make financial decision later in life.

Fortunately, talking to kids about money doesn’t have to be awkward or difficult. When my parents started giving me some allowance, they made sure to talk to me about how to use it. It was an ongoing conversation, but keeping the dialogue open meant that every time I needed some answers or guidance, I’d have asked their help. So, here is what I’ve learned during the process. Check out some useful ways to help your kids develop healthy financial habits!

How to Influence Sensible Financial Decisions in Children

#1. Teach Wants Vs. Needs

It’s not always easy to remember that kids can take our words literally. I have to be careful when I say I need that new pair of shoes when I really just want them. It confuses the difference between a want and an actual need.

When your child is old enough to understand, talk about wants versus needs. Help them come up with a list of things they couldn’t live without and things that are extras. Make sure this isn’t a one-time conversation and that you discuss wants versus needs throughout your time as a parent.

Make sure your kids know that it is okay to have wants. Everyone does. Just help them learn to prioritize so the things they need are what they purchase first. Let them see you do this as an example.

#2. Emphasize on Experiences

As I age, my wants have taken a different shape. Spending money on experiences tends to mean more to me than spending money on things. Museum passes, yoga classes, and tickets for events I enjoy leave me with the memory of the experience, and that gives me more satisfaction than material items.

Let your kids know that wants can be in the form of things they do instead of things they obtain. Research shows that experiences can also make us happier than material items, meaning money can buy happiness to a certain extent. Kids just need to learn how to make the money work for them.

The experience also doesn’t have to be one that benefits our kids directly. For her birthday, my niece chose to both donate and ask others to donate to an organization she wanted to support. She decided not to receive gifts to make this possible. She still carries the joy of this experience with her.

#3. Promote Responsible Spending Habits

When my kids are old enough to get an allowance, I’ll show them how to split it into categories. They’ll have spending, saving, and giving bin, and they’ll have to put a percentage in each.

• Spending will be for whatever they want.
• Savings will be collected in case they need it.
• Giving will be for them to help out organizations or individuals they choose.

To enforce this lesson, my husband and I will let them see us doing this as well.

Teaching kids that getting money doesn’t mean immediately blowing it helps them understand this before they are earning a paycheck. It’s never a bad idea to teach kids how to be altruistic. They will hopefully carry those lessons with them as well.

Besides altruism, remind kids that where they spend their money matters when making purchases. Try to set an example by buying local items and supporting businesses whose practices you support. Kids can learn early to be ethical consumers.

Additional Reading: Affluenza: How Overconsumption Is Killing Us and How to Fight Back

Parenting Methods for Shaping Sound Financial Decision

How We Talk About Money Matters

It’s important to talk about money with our kids so we can teach them how to budget and use it responsibly. Ignoring the topic will only lead to confusion down the road that can trap our kids in credit card debt or bad investments. However, how we talk about money matters is an important consideration.

If adults only talk about money in a stressed-out tone, kids will pick up on it. This inflates the importance of how much money is made while also constantly connecting budgeting and finances with stress. Instead, keep a positive tone and talk calmly about how to work through difficult financial situations.

It’s also important for kids to know that money doesn’t equal success. Conversations your kids hear should not make them think that their success is measured by how much money they bring in one day. Encourage them to pursue a passion and learn to live on what they make instead of trapping themselves in jobs they hate to bring in money they don’t need.

It’s Okay to Let Them Learn

Kids are going to make mistakes with money. A young child might save up a week of allowance money and blow it all on candy. This will be unsatisfying when the money and candy are gone, but the memory will be worth it.

That’s why I let my kids make mistakes and learn while they are under my roof. The stakes aren’t as high, and the feelings that go along with blowing money on something that wasn’t worth it last. If I stop them every time I see them making a bad choice, they will just make them in the future when the consequences will be much worse.

My nephew has learned to put his money back and watch it grow until he finds something he really wants. This lesson came after spending money on things he didn’t really want simply because his siblings were spending money. It was a painful lesson, but it had a positive effect.

Also, my kids are watching what their cousins do and even if they’re still small, they’re able to learn some valuable lessons regarding money. 

Encourage Budgeting

A young adult should not handle a budget for the first time after moving out and living on his own. Ideally, parents teach their kids how to budget before they leave the house. This doesn’t mean obsessively involving your children in every single aspect of your finance management. Don’t be a codependent parent and put an overwhelming pressure on your children. They don’t need to know things like how much it actually costs to raise a child. But showing them that the money going out can’t be more than the money coming in is a lesson you’ll want them to learn.

There are spreadsheets and apps that make budgeting simple. Kids can put in the numbers, track what they spend, and see the impacts of their decisions.

Parents have a major impact on their children’s decisions, even their financial ones. Start teaching kids early, and model spending behavior you want them to see.

Author’s Bio:

Christine Carter knows a thing or two about living on a budget as a stay-at-home-mom! After working as a finance advisor for 8 years, she knows all the hacks and tips that she is willing to share with all of you amazing moms! You can find all her advice on how to earn, make and save more money and enter the world of financial freedom on Find Your Mom Tribe blog. You can also stay in the loop and follow Find Your Mom Tribe on Facebook and Pinterest.

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What are some of your tips to engage your kids about making good financial decisions? Do you plan to openly talk about money matters with your kids when they’re old enough to understand? When is the best time to start this conversation?

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