Three Rules For Teaching Kids About Money

Many people think our society has grown fat and lazy. We have luxuries our parents could only have dreamed of. Imagine -- 2 or 3 cars, color television with more than a couple of fuzzy channels, family arguments over where we're going to vacation this year. Many of us also have greater financial resources and the time to ponder how to invest them. So it behooves today's parents to help their kids understand money and how it works. But to make a credible presentation to our kids, moms and dads have to do some things right, too. Let's spend a minute on three things we grownups need to be doing.

1) The first, and most important rule for teaching your children how to manage money is to set the right example yourself. This is one time when the physician had better heal himself first -- before he starts dispensing pills. Kids are smart and their hypocrisy meters work overtime. To tell a child to do something that you are unwilling to do, not only dilutes the impact of the message -- it dilutes the respect they have for the messenger. To have credibility and moral authority, a parent has to be willing to go the extra mile and not cut corners simply for short-term gratification.

Does this mean you have to do everything right? What about the past -- can a parent regain the moral high ground when the kids know you've made previous mistakes? Sure, but it requires honesty and a willingness to admit the obvious: "There have been times when Mom and Dad have blown it. But, we're learning, and we want to help you kids avoid some of the painful mistakes we've made."

Then, it's a matter of walking the talk. The kids will be watching. If they see you making the tough decisions and lifestyle changes to get your own financial house in order, it will serve as a powerful motivator and example. But, if you slip back into old habits that, too, won't go unnoticed.

2) What parents do with liberty, the kids will do with license. One of the most important things any parent can do is to understand (and accept) this concept. What you do on a controlled, moderate level as a parent your kids are likely to take to the extreme. There are lots of Christian parents who insisted on their "liberty to drink socially" when they had small children, who would give anything if they could change things today. Many of them are dealing with grown kids who used their parents' liberty as a license to drink or use drugs destructively.

The same holds true for family money issues. Whatever your children see you do will tend to have a geometric effect on their behavior. If your children perceive a lack of self-control and good stewardship in the purchasing and savings decisions you make don't be surprised if one day you see the same behavior on their part being played out in an extreme, mutated form.