Teaching Your Kids Financial Discipline

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We take so many of our habits, both good and bad, from our parents. When thinking about your spending habits, consider how your parents might have influenced you. Did they give you a thorough education on how to handle your money? If not, how will you make a difference for your children? Here are some tips to teach your kids about financial discipline.

financial discipline

Start Soon

As soon as your kids understand money, you should train them to use it wisely. If they have an understanding of math (at least addition and subtraction) use this to your advantage. Tell them about how much things cost and how much money they have in a given scenario. You should also help them to think about their money every time they want to spend.

Will the purchase be something that satisfies them long-term or be quickly forgotten about? Having these questions on their mind at a young age is very important. An excellent way for kids to get practical experience in understanding the real value of a dollar is having them earn it.

Classic examples of letting them run a lemonade stand, do chores for you and others can be a great way for a child to understand that money is a valuable asset that is earned.

Give Kids an Allowance

Whether you give your kids an allowance for chores or not is up to you. Their compensation shouldn’t be provided for just pocket change. However, it should be modest enough to teach them the true value of a dollar. Should they be running out of their allowance as soon as they obtain it, they might not be thinking far ahead. Don’t let them come begging for more money after wasting it. They need to learn how much their money should matter.

Let Kids Make Mistakes and Show Them Yours

Kids don’t think in the long-term. If they want something, they’re going to go for it. Should there be, an impulse buy your child craves and they have the money for it, don’t stop them. Instead, let them learn from the experience. Use their wrongful purchase as a teaching point later on.

They can realize how being so eager to spend can cause them to lose foresight. It’s no secret that even if we have excellent financial education as adults, we will still make foolish financial decisions and purchases from time to time. This should not be something that you hide from your kids, instead use this as a teaching point. Many financial mishaps on the adult level, may be too complicated for a child to comprehend fully. Therefore, explain it to them in terms that they can understand and relate to.

Teach Kids about Savings

Saving money might seem like a horrible burden to kids. It can seem like they’re money is being locked away forever. Instead, you can use this as a time to teach them about waiting for good things. You could show your children how in your own life there were many times you wanted to buy several small things but instead, you bought one big cool thing. Showing them what big ticket items you have purchased, as long as they’re interesting, can be a great encouragement to keep them going.

A few mediocre purchases made immediately have nothing on one terrific purchase that they waited for. It would be beneficial to most kids to let them pick something out that they want. That way they can have a solid idea of what they’re working for and saving their money for. Doing this will help them pace their spending. Just barring them from spending their money on what they want will feel like a punishment instead of a greater reward down the line. When they grow up and consider things like credit cards, they will likely have a much better understanding of not delaying payments.

Ask for Their Advice

Kids greatly appreciate being treated like adults. When you’re at the grocery store, ask for their advice on specific items. For instance, if you’re stuck between a quart of milk for $2.25 or a gallon for $3.75, ask which would be the better value. You can also ask them about if you should or shouldn’t purchase it, and why. Listen carefully to their reasoning. There’s a good chance they might be spreading your wisdom to their friends. With enough effort, you could be inspiring a new generation of money-smart kids.

Financial discipline isn’t about becoming rich. Someone who is a millionaire could be in dire straits, while someone who earns a more modest salary could be doing great. It’s all about planning and being aware of your spending. With these tips, you can set the best example possible for your kids.

12 thoughts on “Teaching Your Kids Financial Discipline”

  1. I especially like the part about asking kids for their advice. Giving kids a chance to practice what they’ve learned is crucial, even if it’s not something they’ll do for awhile (like buy groceries). Every kid likes to feel grown-up and this gives them a chance to feel that reward while learning responsibility.

  2. I think the best way to teach kids financial discipline is by being a good role model. I know parents who are spendthrifts yet try to encourage their kids to save…that’s not gonna work when you’re a hypocrite. My kids are still young and I’m still figuring out what to do with allowances. I want them to do house chores because it is expected as being part of the family but also want to give them allowance so they learn to deal with money. What age did you guys start giving out allowances to your kids?

    • We started at 5 or 6 with allowance. A small amount for help with small chores. We increase it over the years with the responsibly. We including things like laundry and cooking. We wanted them to have a good grasp of basic life skills.

  3. “Don’t let them come begging for more money after wasting it.” A double yes to that! That was my parents’ biggest mistake with me: Caving when I whined for an advance on my allowance.
    “…we will still make foolish financial decisions … from time to time. This should not be something that you hide from your kids.” Another double yes. Too many parents would say it doesn’t concern their kids – or that it’s private. Sharing our mistakes opens up the discussion and makes us more approachable as parents.

    • Lead by example is some of the best advice my dad gave me. It could not be truer with money. Involving our three children in our money has been one of the best decision we have ever made.

  4. Really great topic. I know I need to let my kids make money mistakes, but this is the hardest one for me.

    • They don’t need to be big ones. Our son and daughter are freshmen in college, it’s interesting to see the money choices they are making, some good, some bad. The best is to have the relationship to openly discuss it with them.

  5. That was a great post! I have been discovering more and more how much childhood and my parents have influenced the way I think. I hope I am pointing my son the right way, but won’t know for sure until he grows up. Nice to know what others think about this topic. Thanks!

  6. I would add encouraging them to invest. With fractional share sites, they can learn to invest and watch the market for very little. Stockpile has a user interface geared towards kids and a custodial account. They also have physical gift cards so parents and grandparents can give gifts that allow them to choose stocks in their own account. Great way to learn and fun.

    • I love Stockpile. I gave all three of my children stockpile gift cards for Christmas this year. I great way to introduce them to investing.

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