Set an Example for Your Children
When I discussed the idea of implementing an allowance system as a means of teaching your children how to save, I failed to mention that there are additional steps in the process of educating your children.
One of the steps that I feel is critical is setting a positive example for your children to follow. While it is important to create an allowance for your kids and have guidelines on how that money should be divided, they need to see similar behaviors from you.
Think of the message that it sends if you tell your children that they have to save a percentage of their money and donate a similar percentage to charity yet you do not save any of your money or rarely donate to charity. It is amazing to see how children will model their behaviors after the things that they see, which is why it is critical that you do not fall into the “do as I say, not as I do” trap.
Have you ever wanted to purchase an item and opted to bypass the process of saving for the item and used a credit card instead? Using a credit card is not a bad option, assuming you have the cash to pay the balance when the bill is due. But using a credit card and paying interest for the purchase is teaching your children that there is no need for the delayed gratification of saving for an item.
In many families, finances are a taboo topic and information is not disclosed to the children. While I do not think every detail needs to be given to your children, I think it is essential to discuss how you handle your finances and use that to set a positive example for your children.
In my opinion, some parents avoid discussing finances with their children because they are embarrassed about how they handle their own finances. However, that can be a great learning opportunity for your children as the entire family can learn from previous mistakes and gain a better understanding on the importance of saving and living below your means.
As you pay your children their allowance and have discussions on how they handle their money, please be sure to practice as you preach and use your actions as an example for your children. Involve your children as you review monthly statements from your savings accounts or let them sit down at the computer with you when you transfer money into a savings account. Let them see that you are doing the very things that you are teaching them and it will go a long way to reinforcing the importance of saving.