The number one concern we hear from our clients is the worry that their wealth will negatively impact their children and grandchildren, causing them to be spoiled, entitled, and to lack motivation.
Questions like these are keeping thoughtful parents up at night:
Here are 5 keys to teaching your children financial literacy and responsibility:
Start early. Many of my clients say that “I don’t want my kids to know that we are wealthy,” I usually ask them “‘How do you fly? What does your house look like compared to others.?” Kids are pretty intuitive and they can see the differences. If you don’t start talking early to your children, in honest and developmentally appropriate ways, they will be awestruck by the responsibility later on.
Use educational tools. We tend to think of money as something that it isn’t. Money is a form of barter and a tool. Children need an active practice with that tool. With young children, I use an exercise with three jars — one is for spending, one is for saving, and one is for sharing. I have the parents engage their children in a dialogue about the kinds of things they each want to use their money for in these 3 categories. It makes for a great discussion and the kids get a hands on experience of how to divide money. The children begin to make their own decisions about what is important to them.
“How do I teach my kids to be smart with money, to understand the value of money, and to be responsible with their money?”
Let children make mistakes. Just because you are fluent in French, that doesn’t mean that your children will inherit this knowledge from you. In order for them to become fluent themselves, you will have to talk with them in French and they will have to make mistakes and practice the language. It is the same concept with teaching kids financial literacy. Your children need an opportunity to learn, to practice, and to make mistakes while the stakes are low. Give them an allowance, let them make their own purchases, and then talk to them about their choices. Growing up is a prime opportunity to let kids make mistakes and to learn how to be savvy about how they are spending their money. And it just might save the purchase of an ill-advised Ferrari down the road.
Walk your talk. If you talk to your children about the importance of saving money or helping others and you’re not doing it yourself, your words will always fall on deaf ears. If you tell your children ‘we can’t afford this or that’ and you’re out still getting everything you want — they’ll notice that too. Develop a family philosophy about money and discuss that philosophy with your children.
Age appropriate dialogue and a level of transparency is essential. When working with inheritors, I hear a variation of the same story almost all of the time. “While away at college, I received a bank statement, at 21, that says I suddenly have a substantial amount of money in my account. No one has talked to me about it and it comes as a huge surprise. Who the hell could I possibly talk to about this? I feel overwhelmed and confused and don’t know what to do. It doesn’t feel like a gift, or something to be appreciative of, I just feel overwhelmed. It’s like receiving a ‘we’ve moved notice’ in the mail from your parents without even know they were moving.
Originally published at /events/easyblog/entry/raising-empowered-rather-than-entitled-children.
Originally published at medium.com