teaching kids about money

Your Kids are Watching You (and Your Money)

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Good or bad, where do you think your financial habits came from?

Truth: The way you manage your day-to-day finances is a direct reflection of how your parents managed their own money.

Did you grow up in a home where money resulted in neverending stress and heartache? Did you see Mom live off of credit cards, Dad bounce and few checks, and panic set in when that monthly statement came in from the bank?

Or maybe you grew up in a family where the man handled the finances and you still feel like you are just along for the ride without a vote. Your parents may have been ultra-spenders and now you find yourself doing the same thing as an adult. Maybe your parents are still struggling with money today and you see yourself making their same mistakes with no end in sight.

I can relate because I was also a direct reflection of how the money was managed in the Peach home growing up.

 

Growing Up Peach

Mom and Dad were both self-employed entrepreneurs; Dad owned a construction company and my Mom worked for herself as a travel agent. I didn’t realize it at the time, but I now look back at those years when business was booming, which meant new toys, European vacations, and a bigger television!

However, I also remember the years when business was down. The talks at the dinner table were quiet, Dad’s mind was somewhere else figuring out the numbers, and a letter in the mail with our bank’s logo on it meant one thing only: Mom and Dad needed to talk while my sister and I went to our rooms.

Growing up I picked up one (wrong) thing that stuck with me about money: Money was stressful and if you had more of it, the better your life would be.

How fitting that I would develop these exact same patterns within my own finances and repeat exactly what I learned from Mom and Dad as soon as I became an adult.

 

Growing Up Andrea

Andrea on the other hand had a different view of money.

She remembers waking up in the middle of the night and quickly packing up the house because they would be moving in with Nana in the early morning. She didn’t realize it then, but rent was due again and the money wasn’t there – they were being evicted.

She grew up learning that money represented a roof over her head, a pantry full of food, and new clothes for school. In her mind, money represented a safety net and status.

Why do we behave the way we do with money?

It’s Simple:

We learn from Mom and Dad, AND more is Caught than Taught.

 

The Reality

Over 70% of people are living paycheck to paycheck, the average credit card balance (for those carrying a balance) is just under $16,000, the average student graduates with $38,000 in student loan debt, and nearly 40% of Americans haven’t saved a nickel in their retirement plans.

If this is what life looks like now, what’s life going to be like for your kids in the future?

The change starts with you.

The number one habit of highly successful people according to Stephen Covey’s 7 Habits of Highly Successful People is being proactive.

Could you imagine if you could go back and time and develop a strong financial foundation when you were growing up?

  • What would your life look like now?
  • How much debt would you be paying on each month?
  • How much more would you be saving?
  • How much less stress would you have in your life right now?
  • How much more hope would you have for the future?

 

Think about this: The maximum amount of time you have to teach your kids about money is only 180 months. If your child is already ten years old, you only have 96 months left. If your 15-year-old is still bugging you for another $20 to go to the movies, you have less than 36 month to make an impact on their financial habits.

The clock is ticking and it’s up to you…

 

Your Kids are Watching You

If you are going to have an impact on the teaching your kids good financial habits, it starts with you. 

Think about this: When the cabin pressure in a commercial airline decreases, oxygen masks fall from the ceiling and you are told to first place the mask on yourself and then on your child.

Why is that? 

Well, if you aren’t functioning at 100%, then your kids are doomed. You must get you working first before you can teach your kids how to do the same.

Start doing and they will follow…

  • If you live on a budget now, your kids will someday live on a budget as well.
  • If you use a credit card for every single purchase, your kids are going to someday use a credit card for every single purchase.
  • If you spend with cash, your kids will eventually learn to spend with cash.
  • If you live a life of car payments, your kids will live a life of car payments.
  • If you are generous with your money, your kids will also be generous with their money.

I think I see a pattern here 🙂

More is caught than taught, but I still want you to be intentional about teaching your kids how to handle money. If you’re looking for a jump start in the right direction, here are some tips, tricks, and ideas you can use to become proactive with helping your kids develop a strong financial foundation.

 

Here is exactly what you should be teaching your kids about money (and when):

 

Age 3 and Under:

your-kids-are-watching-youMoney is merely interesting at this age, meaning you’re not going to be able to make much of an impact younger than age 3.

If you’re trying to develop strong financial habits here and you’re having success, then your child is gifted and you can move them into the 3 years – 5 years group below 🙂

Age 3 -5:

At this age, money is visual. Two quarters is more than a $20 bill, and they may like the design of the $5 bill over the $10 bill.

If your kid is anything like ours, you may be told that a penny actually tastes better than a dollar bill! Gross, I know.

The best thing you can do here is get a giant clear jar. We actually found this same money jar online made out of plastic with a slot to drop the change through.

Over time this jar will fill up and what’s important to your child is not the value of the money inside the jar, but rather the weight, shape, and seeing of all that money in their jar 🙂

How do they get money?

The last thing you’re going to want to do here is start your child on an allowance. An allowance simply means if you wake up and breathe air, you will get money for it. To me, this sounds very similar to entitlement. No thank-you.

Instead, start the realization for your child that work = money. Money comes from work or from providing value. This may be feeding the dog, picking weeds, cleaning up their room, sweeping the garage, or anything you can think of.

The takeaway here is this: Work – get paid; don’t work – don’t get paid.

Do they get paid for everything?

Do you get paid for everything? I didn’t think so.

This is a great age to also start teaching that not everything earns you a paycheck. Mom doesn’t get paid to make dinner, Dad doesn’t get paid to wash the car, and your child may not get paid to make his bed. That’s your call, but it’s also called the real world, right?

When do they get paid?

At this age, you need to pay your child as soon as the job is complete. If you wait longer than five minutes, your kid is going to forget why they’re getting paid and you could be losing a valuable teaching moment. Also, remember that four nickels is more than three quarters in your child’s eyes. It’s not about how much they get, but how quickly they are paid.

What do they do with the money?

Let them spend it and spend all of it.

At this age they’re not going to fully understanding saving for a rainy day, or saving for the future. Their minds are not ready to delay pleasure, so it’s best to develop another great habit: stuff comes from money.

Allow your child to take his jar to the store and buy whatever they can afford from the money in their jar. It’s okay to say “no” when they point to the trampoline for $700 when they only have $4.75 in their jar. Remember, contrary to popular belief, “no” is not a cuss word.

Let them spend every penny in their jar and allow them to buy absolute crap. What your child is learning here is how to hand money over to the cashier and get something in return, and right away for that matter. Even if your child’s toy is crap, they are going to think it’s pure gold because they bought it with their own money. This is powerful, even at such a young age.

 

Age 6 – 13:

This is the period where money still remains visual (this actually never ends for the rest of your life, right?) but the monetary value associated with money can be understood.

Better Jobs, Better Chores

As your child gets older, their jobs become more important. Before this point, it wasn’t so much about the job quality as it was to understand money simply comes from doing work.

You can also draw a line in the sand and keep chores on one side and jobs on the other side. Chores are the responsibilities we have in which we aren’t paid: dishes, making the bed, picking up toys, etc.

Jobs on the other hand are the things your kids can do to earn money. This can be anything you want it to be, just make sure there is a defined separation between jobs and chores. Once they start blending together, your thirteen-year-old is going to figure out a way to start getting paid for making her bed and brushing her teeth 🙂

Paydays

Welcome to paydays, and I don’t mean the candy bars.

Starting somewhere between ages six and seven, you can create paydays. This is where you get to start teaching delayed satisfaction. You and I don’t get paid the moment we complete a task at work and it’s okay for your child to learn this now too.

Consistency is also very important here. You expect your boss to pay you on the 1st and 15th, bi-weekly, weekly, etc., and your kids should expect the same. Sunday nights after dinner means payday for our kids. We keep track throughout the week for their jobs they did do and did not do, and they are paid only for what they did.

Save, Spend, and Give

Up until age five, your child was learning the value of handing money over to someone and getting something in return. Now, we are going to add to a few more levels of managing money; saving and giving.

You as the parent decide on how much money they are setting aside, and more importantly, what they are saving for. Is there a special toy they want, a new outfit, or something they have been begging you for?

This is the time where you get to help them save up and pay for it. If it’s something really outside of their cost of living and you want to help them with it, tell them they have to meet you halfway and you will cover the rest.

Get creative, but the takeaway here is delaying instant gratification. There’s a reason why we live in a society deeply in debt and paycheck to paycheck; we want it and we want it right now.

Giving is the most important lesson you can teach your child about money. As we get older, it is natural for us to become less generous with our money and hold onto it with a clenched fist. This is where you get to choose how your child will give, what they will give to, and how much they give.

It can be an offering jar at church, a tip jar at the ice cream shop, or to anyone or anything for that matter. Some of the wealthiest people in the world are also some of the most generous people in the world.

Guess what? Their generosity came before their wealth.

Age 14 and up:

Starting at age fourteen, it’s important to remember your child is still your responsibility.

You have the final say and you’re allowed to say “no”. No is not a cuss word but rather a tool to help your child make the best possible decisions. Contrary to what they may believe, you have been around the block, you have seen this before, and you have the T-shirt to prove it.

Get a (real) Job

This is the age where they can start getting real jobs and learn one of the absolute truths in life: taxes.

Spending “their” Money

This is going to be a challenge, but you are going to have to face the argument of “this is my money and you can’t tell me what to do with it.”

Ahhhh yes, I remember having this conversation with my own Dad when I was sixteen and brought home my first paycheck from the smoothie shop I worked at (they called me the smoothie slinger).

However, my Dad had a very unique way of curbing this attitude without having to apply much convincing. He simply showed me the money, Mom and Dad’s money.

Show Them the Money

Up until this point, you have done an excellent job in the early years of work equals money and money equals stuff. As they grew older, you implemented paydays, you separated chores from jobs, and you helped them save, spend, and give. Starting at age fourteen, your child is more financially responsible than our own U.S. Government!

This is now where they have developed enough maturity with money to see the numbers. Sit them at the computer and show them how much the house payment is.

Show them how much the electric bill is, the phone bill, the car payment, insurance, gas, and every little thing you pay for before you get to keep any of it. This is going to shock them and this is exactly the point!

I remember my Dad sharing this information with me and two powerful things happened:

  1. I began to understand the value of money at an adult level
  2. I started turning off lights and closing doors

Showing your teenager the numbers is powerful because this is also going to form a level of trust. Money is something we are taught to whisper about, never talk about, and to sweep it under the rug.

However, you have an incredible amount of knowledge about finances your teenager doesn’t know. Would you rather them learn after they get a few credit cards, max them out, and experience a ton of unnecessary heartache? Or, would you rather them learn from you while still under your roof?

Save up for something BIG

You had them learn to save during the ages of six to thirteen, and now is the time you get to challenge them to save for something HUGE. This can be a car a few years down the road, a trip they want to go on when they graduate high school, or something that is going to cost into the thousands of dollars.

Why something big?

When we enter the real world, life requires bigger things. Cars, trucks, large down payments, etc. Instead of allowing popular culture to teach your children that if you want it right now then you can get it right now if you go into debt, teach your kids to behave differently, save up, and pay cash. The financial term for this is called affording it.

Of course if the item they want is well beyond what they can accomplish while in high school, playing sports, or doing other activities, you can still provide help but they need to still be actively involved.

Just like your employer may offer you a 401(k) match, you can (and you should) be willing to offer your child some kind of match. This still forces your child to have skin in the game, but also allows you to have additional say in what is purchased and for how much. Remember, you are still the parent, and parents still have the final say.

Your Kids are Watching Everything You Do

I have said this over and over; money touches every aspect of your life. Therefore, you kids are not only watching you, but they’re also watching your money as well. Become intentional about raising money-smart kids now so they one day will be able to take care of older money-smart parents like yourself. Just as I encourage you to invest in yourself and invest into retirement, it’s just as important to invest in your children.

Tick-tock-tick-tock…time is running out.

 

Let Me Finally Show You How to Manage Your Money

Do you feel like you’re stuck living paycheck to paycheck? Does it seem like there is never enough money to make it to the end of the month? Are you worried about how you’re going to possibly save for the kids college when you can’t even afford things right now?

Head on over to Awesome Money Course and see why my #1 online program is changing the game and helping people all over the world take back control of their life and money.

And, we have entire Module on Kids, Money, and College Planning!

 

 

What would life feel like without debt?

What would it be like if you had $10,000 set aside for emergencies and a plan for your future?

What would life look like in 10 years from now?

What about 30 years?

What about teaching your kids the right way to handle money so they don’t repeat the same mistakes?

You have a choice:

  1. Finally get it right this time
  2. Keep trying to figure it out alone.

If you are ready to take that first step, then check out what this life changing course is all about!

As always, thanks for being a part of and making Money Peach YOUR go-to place to learn about YOUR money.

-Chris Peach

 

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2 replies
  1. Brenda perez
    Brenda perez says:

    These things are so true and I’m definitely going to start implementing this techniques right away, while she is still little…Thank you! !

    Reply
  2. Wandered Into Debt
    Wandered Into Debt says:

    Kids: More is caught than taught! All we do right now is model what we do (cash for everything, debt is dumb, mommy and daddy budget every month) And each kid (ages 2 and 4) has three glass jars: one for saving, one for spending, one for giving. It’s a start I wish my parents had given me!

    Reply

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