Taking the time to teach your children a few financial lessons can insure they become fiscally responsible adults. Though nothing is set in stone – no one is doomed because of their parent’s choices – parents are in a unique position to deliberately mold their children’s financial attitudes and behaviors. And it all begins with talking and setting a good example.
Talking to your kids about money
Recent studies indicate that parents who regularly talk with their kids about money tend to raise much more financially responsible adults. Those parents also tend to encourage their children to set money goals and work towards those goals.
Setting a financial example for your kids
Just as important as talking to your kids about money is setting a good example – practicing what you preach. Children are keenly aware of hypocrisy and if you talk about living below your means but constantly don’t live that principle, your kids will take notice.
What behaviors should you model?
One study performed by Maritz, a sales and marketing company, found that financial achievers exhibited at least five of the following behaviors after opening an IRA or signing up to participate in an employer’s 401(k) or 403(b):
- Live within a budget such as YNAB
- Track and control expenses
- Save money by default
- Live beneath their means
- Regularly contribute to an employer’s retirement plan
- Pay off any debt in a regular, controlled manner
- Contribute to an IRA
- Deposit money in a savings account automatically
The difference was the magic number of five. Those who performed any five of these behaviors were on track for financial success. Maritz classified those who only participated in four of these behaviors as just “dreamers.”
The key is to have already opened that IRA or to sign up for your employer’s retirement plan. It all starts AFTER that.
Parent’s have a far-reaching effect on their children in so many ways and the money aspect of a child’s life is no different. By talking with your children about money and exhibiting the discipline to practice what you preach, you’ll not only be financially better prepared in your own life, but you’ll potentially help your children learn the importance of being prepared themselves.