Money lessons you won't learn in class

INQUIRER.net

Q: I grew up not really knowing how to handle my own money. My parents gave me a daily allowance until my graduation from college, and when I needed something, I just had to ask them. Reality bit me hard when I started working and had to live on what I earned. Now that I am a father to two young sons, I want to impart the right lessons to my children, including how to handle money. Where do I start? – Tom

A: Along with a good education and the right values, the skill to handle money responsibly is one of the best gifts you can give to your children. You and your wife are right in saying that money lessons should be taught to kids at an early age. It would be good to raise them well with the right perspective on money so they will be able to decide responsibly for themselves in the future.

Here are key money lessons you should teach your kids, which they won’t learn in class:

Money is valuable. It is not something that appears all the time at an ATM machine or in their wallet. It is a precious resource, one that is produced through hard work. Let your children know that you work hard to earn money so you could all have the basic necessities such as food, clothing, a nice home, and a good school for them. Thus, train them early to regard money as something they should handle well and not squander. With money, the family can have access to needs.

When you are at a supermarket or fast food, for instance, give your children a small amount of money for one small food item you order (maybe an ice cream cone or a lollipop) which they will hand over to the cashier. When they see that the cashier got the money from their extended hand and gave them back the item being bought, they will see the value of money firsthand.

Prioritize needs over wants. When your children keep asking you to buy something that’s not really a need (example, a toy), don’t go out and buy it right away. Let them learn delayed gratification. Explain to them that you will prioritize the family’s basic needs first, and you will need to save up for their wants. This will teach them to ask first if something is a need or a want, and to prioritize needs over wants.

Save for a rainy day. Always stress the importance of saving for the future. Let your children know that when they have enough money saved in the future, they can buy their own cars and drive them someday. Boys are usually fond of playing with toy cars. By linking their love of cars with the thought of having their own real cars someday, you can teach and motivate them to save.

Tell them too, what you are saving up for: it may be a new home if you are currently renting, or a vacation for the family next summer, and their tuition for the coming years in school. Let them know that you are in the habit of saving.

Watch where your money goes. Don’t make comments within your children’s earshot complaining that it’s almost the end of the month and you don’t know where your money went. Instead, let them know that you are keeping track of the family spending by having it all written down.

When you give them a money allowance for school (and you should, so they can learn how to use it), ask them at day’s end what they did with it. Tell them to write it down. With this simple gesture, they will get into the habit of watching their own spending and living within their means.

And while you’re at it, teach them how to make a budget. With their daily allowance, suggest amounts they can allot for savings and for spending. Instruct them not to go over their spending limit since that’s all the money they have for the day.

Live simply. It is a materialistic world we live in, and we are constantly bombarded with suggestions to buy this and that. Resist the urge to buy top name brands and live simply. Young children have no concept yet of what brands are high-end so communicate early on that it’s who they are inside that is more important than the brand of shoes they wear.

Money is not the ultimate goal. Let your children know that the best things in life are those that are free: time spent together as a family, having real friends, and being in good health. This will greatly help them put things in the proper perspective.