Kids don't learn about money through osmosis. They don't magically learn to become financially responsible. And SpongeBob isn't going to teach them to save. Children must be taught these principles, and they must be encouraged to practice them from a very early age.
How do you teach your children to be financially successful?
If you want your children to grow up to be financially responsible adults, you have to let them handle money often and early on. They need to practice spending, banking and saving. They need to learn what it feels like to blow all their money and then not have money for something they really want or need.
There are some dangers, according to Paul Lermitte, financial planner, that parents face if you don't have a system for teaching your kids healthy habits and attitudes about money.
• Financial dependency: Your kids could become financially irresponsible, and remain financially dependent on you.
• Destructive values: Your children could develop destructive values about money, equating it with self worth or becoming addicted to possessions. They may believe that happiness depends on having the latest gadgets and toys.
• Debt: Your child could become paralyzed by credit card debt and have no idea of how to set financial goals or save for the future.
• Loss of confidence: Your kids could lack the confidence to make sound financial decisions.
• Teaching the wrong thing: You may try, but fail, and wind up teaching your children the wrong values about money.
• Family conflict: You need strong principles and a plan of action to avoid arguments over money that can destroy family relationships.
You should understand the following principles in order to teach your children financial responsibility.
• Talk about it: Discuss money issues with children on an ongoing basis.
• Start early: Start working with them at about 5 years of age.
• Give up control: Let them do things themselves. Let them make bank deposits and withdrawals, make their own purchases and decide what to spend their money on.
• Let them make mistakes: Let them make and learn from their own mistakes.
• Set limits: Give your kids enough money to learn important financial principles, but no so much that they think money is unlimited.
• Provide structure: Help them develop a consistent saving and spending plan so they will have some sort of structure to work within as you let them learn.
As your children learn and grow from these experiences, they'll learn to be more responsible and appreciative of what they have – and what they earn.