Money Management

What You Need to Teach Your Kids About Money Management

By  Karen Banes

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As Robert Kiyosaki stresses in his book Rich Dad, Poor Dad, there’s a significant difference in the way the wealthy and the not-so-wealthy teach their kids about money. 

From a young age, the way you handle money, and the messages you send to your children, are shaping their relationship with money, so instilling good money management habits in them is a gift that really does keep on giving, their whole life. Here are a few of the things we should all be teaching our kids, or any young people we have influence over.

Live within your means

This may be the most basic of financial principles, but many young people are reaching adulthood not having grasped it. 

It’s become a stressful old world, even for kids and teenagers. Parents in affluent households may think they’re doing their kids a favor by relieving that stress, in one area at least, and constantly topping up their allowance, or buying them expensive gifts they could never afford with their part-time job.

Teach your kids the simple skill of keeping their outgoings lower than their income (even if that income is just a weekly allowance) and saving for things they want. Maybe then they won’t hit adulthood and immediately become the ‘average’ American, who currently carries over $6,000 of credit card debt.

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Understand true costs

Many young adults, and a lot of older ones, don’t seem to have grasped the basic truth that, unless you have the cash to buy something outright, the sticker price is not what that item costs you.

Too many people think their car is ‘costing’ them whatever their monthly payment is, without ever working out how much they’ll pay off in the end. Too many people put something on a credit card because it’s on sale, never considering it will cost them way more than the original non-sale price by the time they pay it off.

Sit down with your kids and use an online credit card calculator to show them the true costs of those ‘small’ purchases over time.

Curb your impulses

As we mentioned in this article, Americans are impulsively spending an average of $450 a month, or $5,400 a year. And this adds up to around $324,000 over a lifetime. I’m not a huge fan of telling people what they can and can’t spend their money on. Everyone’s values are different. I am, however, happy to give the blanket advice, to my kids and anyone else, to always consider why you are purchasing something. 

Generally we purchase something because we need it or want it. Neither of those are wrong, per se, if we can afford it. The problem with impulse spending is, we often don’t need or want it. We really do just act on impulse, because something catches our attention. Many impulse buys, from online subscriptions to fancy outfits, go unused, representing a true waste of money in every way.

400;”>Impulsive spending always seems like such a small problem, because it happens in small increments, so talk to your kids about the figures above, to help them see the big picture. Kids are often naturally impulsive, but helping them to start getting that under control at a young age will pay off later, in real money.

Develop self-confidence

So much of personal finance is tied to mindset. As Ben le Fort points out in this article, it takes confidence to be frugal, and never more so than when you’re young. A recent survey found that 78% of young adults allow their friends’ financial habits to influence their own, feeling pressure to ‘match’ their spending on things like fashion, gadgets, and entertainment.

Don’t expect too much. You’re not going to stop the average teenager from caring about what their friends think, or buying the same things they do, but slowly building strong self-confidence in your kids and teens may be an even bigger gift than you realize. Learning to keep your own counsel and have faith in your own ability to make good decisions, even if they’re different from other people’s, is actually a trait at the heart of a lot of wealth-building activities.

Adapt to changing circumstances

There are reasons kids from middle-class households can quickly end up in debt as soon as they fly the nest. One is simply that they haven’t adapted to their new circumstances. They think they can live as well as they did within their family, forgetting that their parents spent decades getting to where they are now.

If you’ve done well for yourself financially, you can do your kids a favor by not hiding where you started. Talk to them about being a student or struggling in your first job, how hard things can be financially when you’re young, and how to make decisions that prevent that being a permanent situation. Do it with humor and humility though. We all know how quickly kids tune out if they feel they’re being lectured. 

Teach them the basics

This is perhaps the most obvious, but many kids graduate high school and leave home without ever really learning the basics: how to make to budget, how compound interest works, the difference between an asset and a liability, how to shop around for a bargain on anything from college text books to a new cell phone plan.

The younger you start the better. Young kids often actually feel you’re teaching them something very ‘grown-up’ when you talk about money. Older teens think you’re nagging. These basic principles aren’t going to change, so the earlier your kids start to absorb them and practice them, the better chance they have of financial security in the future.

Karen Banes

Karen Banes

I’m a freelance writer specializing in online business, personal finance, travel and lifestyle. I also work as a content creator for hire, helping brands and businesses tell their stories, grow their audiences, and reach their ideal customers. I’ve lived, worked and studied in six countries, across three continents. Stop by my blog to learn how to run your own (very) small business on your own terms. You can also connect with me at my website or follow me on

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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