How to Teach Children Financial Etiquette

Be a money mentor to your kids so they can manage their finances wisely

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Raising children to become great adults is an incredibly important job. In addition to instilling kindness and good manners, we also need to instruct them in basic economics and money management.

Instill Responsibility

Children who are given an allowance in exchange for doing chores, such as taking out the trash, or who have small jobs to earn spending money tend to grow into responsible adults. Simply handing over cash to them can create a sense of entitlement, while having them earn can instill a sense of pride and underscore how effort is rewarded. Open a savings account for them so they can watch over their money; a piggy bank accomplishes much the same effect for youngsters.

Explain Appreciation

Explain how you earn the money you use to pay for your home, car, vacations, and more. They need to learn to not take money for granted, and to understand that someone had to work hard to earn it. If the child receives a gift of cash, teach them to promptly send a hand-written note of thanks to the giver. An awareness of the effort required to earn the money makes the gift more appreciated.

Advise Discretion

It’s not uncommon for some children to brag to their friends about how much money they (or their family) have, which is why it’s critical that you teach them the value of discretion. Innocent comments can be taken badly by others who may not be as fortunate, and, in any case, these comments are rude. In addition, if the child has a credit or debit card for emergencies, he or she needs to know that any misuse could result in it being taken back.

Help Them Spend Wisely

It’s normal for money to burn a hole in a child’s pocket, so teach them the Economics 101 concept of opportunity cost. As an example, if they had spent their saved money on movie tickets, and now they can’t buy the jeans they had been wanting, explain to them that they could have enjoyed the jeans for much longer than the enjoyment derived from seeing the movie. Teach them to save for something they really want without being distracted by transient desires.

Be Their Financial Role Model

Kids pay more attention to us than we realize, so include them as you go about your daily financial activities. When you buy or lease a car, explain how the payments are structured. Teach them the value of sharing with others—whether family, strangers, charities, or your place of worship. Explain how investments work and how to reconcile credit card and checking accounts, so they know to make sure more money comes in than goes out.