What your parents didn’t teach you about money or how to help kids understand spending

My parents never taught me financial responsibility.  When it came to money, the only thing I learned was to use credit cards and to make sure to have one for every store.  It’s this lack of education that led to my financial difficulties now.

On a recent visit to Target, I made a frightening discovery.  As we walked down the aisles, my four-year old daughter would point to things and say, “Mommy, I want this!”  Although I was forming a great lifetime customer for Target, I could tell that my rampant consumerism was already rubbing off on her.

Looking to the future, I wondered what things would be like when she’s 14 and bombarded by peer pressure. Or what happens when she’s 24, off on her own and trying to maintain a lifestyle she can’t afford?  I realized I wasn’t the only family member who needed to change her spending habits.  To ensure my daughter doesn’t make the same mistakes I did, I’m starting her financial education NOW!

Teaching Children Responsible Spending Habits

For my four-year old daughter, we set up this savings system:

• Each week, she gets an allowance of four dollars for completing her daily chores (the amount is equal to her age)
• We use Sweet Leaf Tea bottles to split her allowance into four separate jars:
  • 10% goes into her Charity jar
  • 30% goes into her Long Term Savings Jar
  • 30% goes into her Medium Term Savings jar
  • 30% goes into her Spending Money jar

There have been some bumps as she learns the system, like the time she wanted to give her charity money to her cousin because she knew the jar was supposed to go to someone else.  But at least she’s gaining a concept of money.  It also forces her to make decisions about how she spends her money: Does she want to spend $1 on a hashbrown at McDonald’s or save it to buy a toy later on?

Money (or the lack of it) is not a secret

Because my parents didn’t teach me about money, we also never really discussed it.  That could be why my problems with debt stayed bottled up inside.  As my daughter embarks on her own financial journey, I want to make sure she has a better start than I had.  Money (or the lack of it) shouldn’t be a secret.  By talking about money with my children, we create a dialogue within the family that forces me to be honest–even with myself.

TALLBACK: What were some lessons your parents taught you about money? Or if your childhood was like mine, what lessons did they NOT teach you that you wish they had?

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