Children learn from watching their parents, so when you interact with money, you’re teaching the next generation some pretty important lessons, for better or for worse.
Teach by example. If your children see that you only spend what you have and are careful to save and donate, they will copy your good financial habits.
Children can start learning about money from a very young age. When they are young and you take them to the store, teach them that you pay for goods as well as service. As they grow older, connect money to work, and explain that money doesn’t come from the ATM but there is a direct relationship between time, effort, and reward. When they get even older, teach them about compound interest, passive income, and the best ways to enable your money to work for you.
If you give your children an allowance, teach them how to budget and save. From the time they were in elementary school, my children entered their expenses every month into a bookkeeping program, and at the end of the month they had to balance their books in order to get next month’s allowance. Putting your children in charge of their own spending teaches them how to balance spending money for their bus fare to school with discretionary entertainment.
Involve your children in deciding about charitable donations to make sure that giving becomes as natural to them as saving.
Maintain financial habits
Make sure your kids see that financial education is ongoing. Consider attending one of the many financial seminars given in town or online. Don’t forget to review your finances on a regular basis. Periodically update your financial plan to make sure your budget and savings goals are in line to evaluate your finances and figure out how to make your money work for you.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published October 26, 2015.