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As if you didn't have enough to think about -- your family, your job, your finances –- here's one more item to add to your to-do list: Teach your kids about money.
Why? Because the earlier you start, the sooner your kids will be able to understand important financial concepts that will affect their roles as future employers or employees. Two popular authors, Joline Godfrey and Robert Kiyosaki, offer advice on what your children and teens need to learn about finances to thrive in the real world.
An Income of Their Own
Godfrey, founder of the educational organization Independent Means, has devoted the last decade to teaching girls how to be financially independent. Her book No More Frogs to Kiss: 99 Ways to Give Economic Power to Girls includes the following tips:
- Teach your kids the importance of doing research and comparison shopping. Go with them when they're preteens to check out several brands and prices for whatever item they want to buy.
- Pay your kids for doing chores, and have them budget how they're going to spend the money.
- Encourage your kids to start a savings account as soon as they receive an allowance, and be sure they balance it every month. As the kids get older, help them transfer the money to a checking account and eventually a mutual fund or stock portfolio, no matter how small.
- Encourage your kids to raise money for causes they believe in.
Rich Dad's Advice
Kiyosaki wrote Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money -- That the Poor and the Middle Class Do Not, and his advice is simple: Don't set your kids up for a lifetime of running on the economic gerbil wheel. Parents who spend their lives living the work-hard-spend-all-you-can-get-your-hands-on-have-the-biggest-house-and-most-toys-you-can-afford mantra often pass it on to their children. Kiyosaki suggests a few things that might seem heretical:
- Live as cheaply as possible. Spend money only on things that give you real pleasure as an individual and as a family, not on things that you feel add to your prestige.
- Let your money work for you. Any investment that doesn't make money for you is money wasted. Teach your kids about the difference between active and passive income, and give them the pleasure early in life of watching their money grow. Teach them about compounding interest and about turning small investments into bigger ones.
- Forget about the neighbors; far too many Americans spend their money based on what others have and end up having to work much too hard just to pay their credit card bills.
- Speaking of credit cards, forget them. They should only be used to finance money-making ventures, if at all.
Our kids are watching how we balance (or fail to balance) earning, saving, spending and investing. They'll take their cues from us. If we seem to work constantly and still have nothing real to show for it, then they'll be imprinted with that same message.
What you do today could help your kids benefit tomorrow. Your guidance could someday help them to balance their company budgets, maintain good credit records that could help them find a job, or find the financial resources they need to start their own businesses. If you want to help your kids get on the right track, then the time to start teaching them about money is now.
