Let’s face it: your children’s spending habits could be one of the biggest challenges you have in paying for college. I found one of Jonathan Clements’ thoughts from his recent WSJ article, 12 Ways to Make Your Kids Financially Savvy inspiring:
“[Teaching kids about finances] isn’t simply about coughing up dollars and cents… what it’s really about is passing along values.”
With that insight in mind, I started compiling a list of my own ideas about how to teach your children the values of practical money practices. I also talked to a few of my employees who are still in their twenties about how their parents’ lessons impacted their financial beliefs:
1. Learning the Value of a Dollar (by the Hour).
Many parents are tempted to discourage their children from working during high school and college, but even a small part-time job can put their spending into perspective. Talking to your kids about the monetary value of their time can help them learn to be smarter, more conscientious consumers.
Think of explaining that those $100 jeans would take about 14 hours of work to pay for with after tax dollars from their $8/hr barista role at Starbucks-it will put a new spin on how they value what they buy, and what you buy for them.
2. Paying a “Tithe” To Charity.
Nothing helps put perspective on the real value of work like giving up some hard earned money to benefit someone else. The earlier you can teach your children charitable practices, the more engrained it will become in their financial lifestyle.
Jamie, part of our Client Services team (and author of our student blog), has paid a 10% tithe on all her income to her church since she was a little girl:
“My parents had me start when I was very young, so it has always felt natural to give up that 10%-and it makes me value the other 90% even more. My parents also give money to Smile Train every year-I hope to be able to give more when my husband finishes school.”
My son has been donating money to finding a cure for muscular dystrophy for the past few years ever since they started sending him free return address labels. (Whatever it takes!)
3. Building Credit for the Future.
College students are hounded to sign up for credit cards from all angles-retailers, campus reps, even their email inboxes-and many kids make the mistake of gouging their credit score by overspending on cards or missing bill payments. Too many kids hurt their future plans of a buying car, a home, or starting a small business by damaging their credit, and a surprising number of students don’t even know how credit works.
Teaching your kids that their current financial actions can affect their future in more ways than one could give them a healthier respect for how they handle their bills and credit cards. Jenn, our Client Relations Manager, remembers her father preparing her early to build a strong credit score:
“My dad would tell me to try and put one bill under my name, and make sure to make the payments on time, just to build credit.”
4. The Saving Game.
Getting your kids to save may not be easy, but it will help them create stability for themselves that will really help when they graduate college and head off into adulthood. One of our advisors, Ryan, now appreciates his parents insistence that he save a strict 50% of all the money he earned:
“My parents actually had me save half of everything I made… from the time I turned 15 when I got my first job until my freshman year of college. It kind of irritated me at the time. But, I knew it was for my own good. It was definitely a pretty cool feeling to be finished with college in 4 years, with no debt, and more money in the bank than I had ever had before.”
Having a hard time motivating them? You could try showing them how compound interest could grow their cash over 10 years, or even treat their savings like an employer does a retirement plan-match all or part of what they contribute. Or you could just use the old parent stand-by: “Because I said so.” (Kidding!)
5. “Wants” vs. “Needs”
As parents, we know the difference between a “want” and a “need,” but without the real world experience we have, our kids sometimes don’t comprehend the difference. Understanding the difference (you don’t “need”that new iPhone, you “want” it!) can help your kids prioritize their whole lives.
The time is fast approaching when they will have the option to take expensive roadtrips every weekend (want) or pay their rent and heating bills faithfully (need)! Teaching them to know the difference now may mean a more stable, fruitful financial future.
All the Best,