While I’m no expert in raising kids (my cats aren’t too financially focused as long as they see food, water, and fresh litter), I do know that teaching kids about money is as important and challenging (maybe even more so) as any other family. Watching my neighbor’s kid has opened my eyes to a whole new perspective of how kids really see Kids and Moneymoney and what their concept of a dollar equates to. Let’s put it this way, he is 10-1/2 years old and we couldn’t afford to have him do chores because he wants more per hour than a highly skilled professional.

So, how do you teach a kid about money? There are so many approaches and schools of thought. When I look back at my childhood I don’t remember a great deal other than being taught to save for what I wanted. However, since I didn’t receive an allowance, I simply got what I wanted and needed (within reason). Was that approach better or worse than living an entirely allowance based childhood? Who knows…

What I know for sure is that actions speak louder than words. How you act and behave around your money – both spending and saving – will have a bigger impact than any book, lecture, or interactive experiment you can give your kids.

They will grow up being driven more by how money made them feel than by any textbook fact they ever learned. Both in my work with clients and my personal money story explorations, I have learned that the feelings and beliefs we have about money typically have their roots back in childhood somewhere — something a parent said or did, a situation that stood out, a strong feeling (usually negative) that got associated with money. For example, a belief might look like “money is more important to my Mommy than me because she is always at work and doesn’t spend time with me” therefore “money is bad or evil”. Or another belief might be “Daddy says I should save but he always swipes a plastic thing and buys us whatever we want even though it appears to cause him pain based on the look on his face”. As adults their behaviors are driven by their beliefs whether consciously or not. So if money was evil, they may have trouble earning what they are worth or finding a career that fits and pays them well. Or, they may find themselves knee deep in credit card debt right out of school because they associated swiping plastic with good feelings.

Again, actions speak louder than words, so be aware of not only what you teach but what you DO.

In the recent Fidelity Investments Stages Magazine they had an article on “Kids and Money: What to Teach Them Now”. What was good about the article is that it talked more about instilling healthy attitudes towards money rather than some cut and dry strategy. After all, there is more than one way to earn, spend, manage, and invest money. Attitudes and beliefs make all the difference in cultivating money behaviors that serve you. Here are a few of my favorites:

Wealth is Not an End in Itself

I would bet our Ten Money Questions series as well as Money & Mates would back this up. Money is just a means to enjoy life and get your needs met. Money can’t buy happiness although bad money habits can indeed make you miserable.

I’m Responsible for My Spending Choices

The earlier you can teach a kid this, the better off you are. While they talk about allowances in their recommendation, I don’t necessarily buy that approach. As I said before, I wasn’t an allowance based kid and I turned out ok. And, with allowances what is equitable pay? How many chores should the kid do? What about kids who have some sort of physical or other disability – do they have to do the same amount of work for pay as their siblings? I think trading chores for money can create a total “what’s in it for me” attitude when it comes to helping others or caring for one’s surroundings; sort of like they must get paid just for doing the right thing. And, what good is an allowance to learn decision making if parents are still buying them $140 sneakers because it is a “necessity”? Sort of defeats the purpose.

So, whether you go the allowance route or not, kids need a portion of money (perhaps from gifts or other earning opporuntities) over which they have some control and decision making power. Let them make mistakes without bailing them out. The sooner they can learn life’s lessons with a small amount of money, the more likely they will avoid repeating these mistakes as adults when the stakes are higher.

Credit Is a Tool That Should Be Used Carefully

I think we’d all agree that this is true. The earlier kids can learn this little fact the better off they will be. This is one area where you REALLY need to walk your talk as a parent. If you teach them they need to be careful with credit yet you’re overextending yourself and earning a PhD in plastic swiping, there is a huge disconnect. Kids will pick up on it and do as you do, not as you say. Once your kids get towards college age, work with them to get them some plastic to use that is either prepaid or one with a darn low line of credit. Then work with them to understand purchases and the consequences (finance charges, late fees, etc.) of purchasing on plastic.

Bottom Line

Most importantly remember that money is a lifelong relationship. You didn’t learn it all by the time you were 15, so don’t expect them to either. Start helping your kids build a positive relationship early on and go easy on yourself (you don’t have to be the “expert”).

Have you found any specific challenges raising kids and teaching them about money because the money perspective is coming from 2 Daddies or 2 Mommies? How do the beliefs of different genders play into our families?