Your Kids & Money
Are you setting your kids up for financial trouble? Experts say if you’re not talking to them about money, you certainly aren’t helping… So, how can we teach our children to be responsible with money?
Gilmore Jasion Mahler CPA Charlie Heid recently shared some ideas during his monthly appearance on WTOL.
So how young is too young to start talking to your kids about money, and what are some good ideas for parents? Charlie says in his opinion, the earlier you can teach them, the better. Some research has shown that kids as early as 5 to 7 years old understand the concept of money and are already forming the money habits that will stay with them into adulthood.
Show your children what saving looks like
There’s plenty that you can do as parents to instill good habits. Start with showing your kids what saving money looks like. Financial expert Dave Ramsey suggests that you use a clear jar to teach your kids about saving. They can see with their own eyes as the jar fills up… and if they spend money, they see the jar empty out. A piggy bank doesn’t allow them to actually see the money collecting in there.
Set an example
Charlie's next suggestion: Be aware of your own behavior. What are your personal spending habits? Your kids are watching you. If you’re charging on a credit card or impulse buying at every turn, your children are noticing. If you set a healthy financial example, your children will pick up on that too.
Rethink the “allowance”
Charlie challenged parents to get rid of the concept of allowance, or at least rethink it. Instead, he said, have your kids earn money for doing chores around the house. It will help them to understand that money isn’t just handed to us, we have to earn it.
Here are Charlie’s other suggestions he shared on the air:
Challenge your kids to wait to buy something: Some experts recommend the one-day rule. If your child really wants to buy something… ask them to wait at least one day to think about it and weigh the decision, it gives them a chance to really think it through, and to avoid the impulse buy.
Instill the value of giving back. Let your child pick a charity the family can support. It will help them understand the value of doing good for others.
Grocery shopping as a lesson in money: Before you go to the store establish a budget, search together for coupons and make a grocery list. Only buy what’s on the list. Help them to understand that you can’t buy things just because you want them… For example, if they want 2 packages of cookies, explain that you don’t need both, so they can choose one or the other.
For teenagers, here are some thoughts:
- It’s a good time to open their first bank account. This is a good opportunity to have them track their money, deposit birthday and holiday money. If it’s an interest-bearing account, they can see their money grow.
- Educate them about credit – they need to understand that borrowing on credit involves interest.
- Be open about household financials. If you’re comfortable sharing with the kids how money comes in, what bills it pays, etc. they’ll have a better understanding. Even if you make a poor financial decision, sharing the consequences openly with your children will help them learn from your mistakes. If you’re not comfortable talking real numbers, you could just convey using percentages: we spend 20 percent of our income on food, 10 percent in charitable donations, etc.
- Let them stumble. If your child wants to spend all their saved-up birthday money on something and you think it’s a bad idea, consider letting them go ahead with the purchase and see the consequences of the decision. And don’t step in and replace the money for them, so they can learn from the mistake.
CPA Charlie Heid is a partner specializing in tax services, who joined Gilmore Jasion Mahler in 2002. He serves clients across many industries, with a focus on manufacturing & distribution. Charlie appears monthly on WTOL-TV to discuss tax and money issues.
Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.