Father’s Day is a great time for dads to talk with their young children about money, particularly ways to grow toward financial independence. Think back for a moment; how much was your first allowance? Chances are it was a modest sum based mostly on your age. It’s a pretty good bet that your parents had an “expiration date” in mind for your childhood stipend. As it turns out, many dads and moms should have put that date in writing … in a contract posted on the fridge!
According to data from the Pew Research Center, nearly one in five adults 18 to 34 years old are still getting regular financial help from parents or other family members. The tight job market, onerous student loans, and the high cost of living are all challenges fueling this trend. Even so, a good grounding in financial basics has kept many other young adults from leaving a body imprint on the parental couch.
Here are some tips on what fathers can do to teach their kids to manage money, be self-sufficient and – hopefully – even financially savvy:
Piggy bank primer. Parenting pundits say the amount of a child’s allowance is not critical. What’s important is giving them a role in managing it. Use the allowance as a teaching tool, taking time to discuss the value of saving and living within a budget, albeit a small one.
Dad knows best. Your own financial behavior serves as a model for your children. Remember that our children are always watching us, and patterning some of their actions after ours. So, try not to fall into financial bad habits such as impulse buying and confusing wants and needs. If you want your kids to learn to manage money well, you have to set the standard.
Cashing in. One way dads can instill a sense of the value of money in children is to use cash. Kids are very visual and learn from seeing cash transactions. They can get to know the denominations of money, and exactly how many (or few) groceries a couple of twenty-dollar bills will buy.
No magic show here. Banish kids’ magical thinking about money. Among financial fairy tales to dispel: the plastic card you swipe represents a bottomless well of money. Ditto, the ATM machine. By the way, the ATM can actually be a teaching tool for the younger kids. Let them push the buttons and count out loud as you make deposits and withdrawals.
Chores galore. Having your youngsters earn their own money is another great way to teach the value of a hard-earned dollar. Go beyond the guaranteed allowance by paying kids for some age-appropriate chores. For example, have the little ones dust the baseboards and ask the older kids to cook some simple meals. Once they understand the work that goes into earning money, they’ll likely also work to manage it wisely.
Promoting financial fitness. Go one-on-one with your kids when balancing the checkbook or paying the bills. Let them sit down and watch what you do at the kitchen table or online as you go about your own financial chores. They’ll get a taste of what it’s like to pay for the home, the car and the electric bill. However, keep it all low-key. You don’t want them sensing if you’re feeling any financial stress.
Never too soon to save. Starting at a fairly young age, children can understand concepts associated with retirement planning, if you keep your language simple. Slowly ease them into the lexicon by explaining terms like IRA and 401(k). If they look a little puzzled, just default to “nest egg.”
What other approaches have you used to teach your child to manage money? Share them with us in the “Comments” section below.