Teach Your Children Money Management

How often do you have discussions with your children for them to understand money management? Do they understand basic concepts such as saving, budgeting, borrowing and debt? Use these helpful tips to teach them!

My brother, Promise is 11 now, but I still vividly remember a particular shopping trip with him when he was 8. We were in the electronics aisle at a discount department store. I had my back to him for a few moments while I tried to figure out which camera battery I needed. When I turned around, I saw Promise plopping a 12-inch television into our shopping cart.

"I'm going to buy this," he announced.

"We don't have the money for that," I quickly replied, and then picked up the TV to put it back on the shelf.

Immediately Promise hollered, "But uncle, I have the money!" Then he opened his billfold to show me his wad of handmade $1, $5 and $10 bills. Earlier that day, Promise, who has always been quite an artist, had used some of the currency in my wallet as models to meticulously draw copies of the bills on white construction paper. He then colored his bills with green and black pencils and cut them out. They looked surprisingly like the real thing. I had assumed he was going to use his homemade currency to play "store" with his younger brother. But on this shopping trip, I realized that was not the case at all. Promise thought the way you "made" money was literally by drawing your own.

Let us talk about money

The whole thing really took me by surprise. I would have never thought Promise had those kinds of misconceptions about money. It made me realize it was time to have some talks with him about money—how it's earned, how to use it wisely, and why it's important to be good stewards of what God has given us.

What about you? Do you talk to your kids—teens and younger children alike—about money matters?

We were told in Deuteronomy 6:6-7

: "These words, which I am commanding you today, shall be on your heart. You shall teach them diligently to your sons and shall talk of them when you sit in your house and when you walk by the way and when you lie down and when you rise up" (New American Standard Bible).

The Bible has a lot to say regarding how we should be using our money. It follows, then, that we should be passing these financial principles on to our children and teaching them at least the basics of personal money management.  

The current worldwide economic downturn adds even more urgency to doing so. "Kids know we're facing tough times, but they don't always understand how we got there," states Karen Varcoe, Ph.D., consumer economics specialist with the University of California Cooperative Extension. She believes the vast majority of parents are not talking with their children about money management. Instead, kids are getting their "lesson" in personal finances by simply watching their parents.

Dr. Varcoe continues: "What they're seeing is most everything being purchased with a credit card or check. They don't see cash very often. This can give them the false impression that the family has an endless supply of money. And indeed, when we use credit cards instead of cash, we generally spend more than we should."

This kind of overspending not only sets the wrong example for kids, she says, but was certainly one of the root causes of the present global economic crisis. It's also the reason so many people found themselves in dire financial predicaments this past year when the U.S. economy nose-dived.

"You need to be telling your kids how to save money and spend it wisely, and why it's important to not misuse credit, so that their future financial stability isn't in serious risk, as is the case with so many people today," she urges. This teaching can begin as early as age 3 or 4, or whenever your child begins asking about money. Your lessons will be very basic for preschoolers, perhaps, just explaining that you have to work hard for your money and that it doesn't "grow on trees." As your children grow and mature, you can gradually get into more in-depth instruction. What if your kids are teens and you've never talked with them about money management before? "It's never too late to have these kinds of conversations," Dr. Varcoe says, "but the sooner you do, the better it be."