Instill in children value and respect of money

Many things in life are learned at a young age. We at needhelppayingbills think it is critical to teach kids the value of money and how to respect it. If someone were to start off life with a strong understanding of finances, including the value of money (earning, saving and spending it), we think those skills are a very important stepping stone so that the child has a better chance of being financially successful in the future.

The savings rate in this country currently stands at a 12-year low; it is in the low single digits of around 2%. This means that most Americans save very little, if any of their income. Couple that figure with fact that the average consumer credit card debt is around $15,000 (which is at a record high level), it seems as if too many if not most Americans live beyond their means. This in effect means they may not “respect” money as they may be irresponsible with it.

Respect money

Valuing money means different things to different people. So, we will take a shot at saying what the respect of money means to us as well as add in a few references to others. Some of this I learned from life lessons, including from my childhood. I was fortunate in that my mom talked about money quite a bit, arguably even too much as it sometimes made me almost paranoid or feel under pressure. But since my dad was mostly “checked out”, even before he officially walked out when I was 13, I understand some discussions of how to value money had to be occurring to some extent….but it may have been too much!

She ingrained in me as a child the fact that you should not spend money frivolously, or on unnecessary things. Spending your money on material possessions (especially items for yourself and not others) does not lead to happiness.  The need to keep up with the Joneses will often prevent you from saving, paying down debts, or investing.

I also learned at a young age, when my family was struggling, that valuing money needs to carry over to everyday expenses. If a child realized how hard their parents worked for a paycheck, and were knowledge about the effort they put into it, this can help children respect money.

Once I saw my mom struggling to care for us, going to work in the evening and/or nights, for some reason I started to cut back on expenses (and help the family save money) by doing everything I could. I had respect for trying to provide for me, and valued the dollars she brought home. I would do simple things like turn off lights when leaving a room, turn down the heat when leaving for school or at night time, help her find coupons for saving money, and more. I realized how hard she worked, and how foolish it would be to spend money on some junky toy or too crank up the heat when I could just put on a sweat shirt/sweater instead.

Teach kids that happiness does not come from material possessions. There are even studies, including one from Elizabeth Dunn, that show that spending money on other people leads to increased happiness, even for children. Studies show that buying “stuff” for yourself does not make you happier. Personally, I am a big believer in that, and would much rather buy a gift for someone else or donate to a cause. I enjoy purchasing a gift for someone else, giving a present, or trying to make someone else happy. If kids are taught that material possessions do not equate happiness, it can help them value a dollar by maybe saving it instead. It is always important to stress needs vs. wants, and go over the difference between the two.

Another key is to respecting money is understand where your money is going. This can include budgeting if it is needed. If children understood all the monthly bills that parents need to pay, and where their income comes from, they can start to value the effort that is involved in working and value money better. Starting a child with a small allowance will help them respect the amount of work they need to do for that money and it will help them value it before spending their allowance.

Since as I kid there were times I was helping my mom apply for jobs, or working on her resume, I had a good idea of the income she had. It helped me realize that buying something for XXX dollars was a big hardship to her or spending money on a high utility bill (when you can save a few bucks by adjusting the heat when away from home) was harmful to the household finances. So, I learned the value of money by having more insight to the household income and expenses.

Communicate to children as well. Experts, including those at Psychology Today, indicate that at as early as 6 or 7, kids can start to understand where money is being spent, such as on groceries, light bills, etc. Kids can in fact be quick learners, and they can retain a ton of information and “soak” the topic in. just do not put too much pressure on the child. If a kid knew how much a toy cost (and how many hours their parent needed to work to buy it), or how much it costs to pay a sport, etc. as well as how much the parent earns, this can help them value it.

Teach kids to save and have money work for them. Teach them to “pay themselves first”, invest it, and save their money. My mom really drilled this topic into me…she was talking about saving, etc. This lead me to start investing at 16 and making my money work for me. What she taught me as a kid, in valuing what an investment can do for you, carried over to adulthood.

One day in high school the economics teacher asked who had any investments, and I recall shyly raising my hand and being the only one in the class. I was in college having stock analyst reports emailed to me daily, reading up on them, and making stock acquisitions as I valued what investing can do. I was also leveraging my student loans (with deferred 0% interest) to invest. When you see how many can grow/compound over time, I think it leads to a great amount of respect for it.

This lesson of making money work for you was instilled into me by my mom, and other kids can learn it too. Parents can partner with their kids to invest and help them save at a young age. Even start a small savings account or make a small stock type DRIP investment…many services only require a dew dollars to get started.

Money needs to be managed wisely. It needs to be respected for how it can go so quickly, and it can be valued for how (if invested properly) money/investments can work for you. Kids should be taught that spending money on themselves is not the path to happiness. While every child should learn how to respect money, it is arguably even more important for low to moderate income families. If they can communicate this to their kids, teach them at a young age, it can help break the cycle of poverty and help children build some financial skills that will help them later in life.

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