We all accept the idea that an education is one of the most valuable things a human being can have. Yet, the truth is that a grade here and a grade there isn’t what’s going to make our kids happy, healthy, productive human beings and yet we push them to get the best grades they can in school thinking that is what’s going to make the difference.

Now there’s nothing wrong with helping our children learn to push themselves and do their best at whatever they’re doing. This will help them in every area of their lives as adults. What I want to distinguish here is the idea that the grades aren’t what dictate whether or not your children are successful in life, and by success, I simply mean happy, healthy, productive human beings.

The things that do help our children be successful in life are communication skills, partnering and parenting skills, knowledge in the areas of health, nutrition and fitness. They need to learn that they are completely responsible for the life that unfolds in front of them and learning HOW to create that life. And creating that life is going to take money so let’s remember to teach them how to manage money wisely and build wealth for a financially secure life.

The question many parents ask it, “What is the best way to teach my kids about money?” That’s a great questions, and the short answer is, “Put them in charge of it as soon as they are ready (ages 6 or so).” What I mean is, take the money you already spend ON your children and run part of it THROUGH them instead.

The fact that we can’t deny is this…very few of us get to be experts at something without plenty of education, practice and mentoring at it. Personal finance is probably the most important skill your children need when they leave home without you because without the proper financial education and skill, most young adults end up in a world of hurt financially. They get themselves into a ton of debt, become depressed and often end up either moving back home or doing things they wouldn’t otherwise do to make money (drugs, sex, crime). And once in a while, they see no other way out and do the unthinkable…they commit suicide over the debt and destruction they think they’ve made of their lives because they simply don’t realize there is a way out.

Teaching Children to Set Financial Goals

Teaching Children to Set Financial Goals

One of the most valuable financial lessons you can give your child is to teach him to set goals with his money. Goals of saving, investing, donating, spending. Learning to set and achieve financial goals goes a long way toward ensuring your child knows now to manage the money that comes into his life. The ever present challenge is always that so many parents don’t do this for themselves so both don’t/can’t set an example of HOW to set goals or even teach their children to do them.

Here’s a simple 5 step process you can use to help your child learn to set financial goals:

1) Ask your child what he thinks a goal is. Explore the definition together until you come to an agreement that looks something like, “A goals is an end result that you work towards in the future. Use a sport or musical instrument or other activity your child participates in to help illustrate what a goal looks like. For example, a goal for a 6 year old just starting to play the flute might be to learn all of the major scales.

2) Start running money through your child on a regular basis. To do this, simply begin by looking at the miscellaneous things you provide for your child, add up the money required and give that money to your child in weekly or by-weekly amounts so that he or she is now in charge of purchasing the stuff you’d normally supply for him or her. For more details, please check out The Ultimate Allowance. This type of allowance takes a little education on both parts (parent and child) and a little more preparation but the results in terms of preparing children to handle money wisely as adults far outweighs the time you’ll put into learning and managing your child’s new allowance system. (Note: I am personally against the type of allowance that pays your child for chores. My philosophy is that they need to do basic work around the house as a contributing member of the family.)

3) Once the allowance system is set up, ask your child what they might buy if they had the money saved up right now. Do the research on and off line to determine how much money it will take and help the child calculate how much and how long it will take to save on a regular basis.

4) Help your child learn different strategies for making and saving money. Encourage them to save part of their allowance, learn to go without a couple of things in order to have something he really wants later (delayed gratification is, for the most part, a learned skill), encourage him to find things on sale and to find ways to make extra money (always encourage his natural tendency to be an entrepreneur!).

5) Teach your children about compound interest and more specifically, compound growth of money invested wisely. Begin exposing him to investment options (stocks, real estate, business) and even if you don’t know much yourself, this is a great time to learn right along with your children.

Using your child’s new allowance combined with setting, and reaching, regular financial goals, your child can reach adulthood knowing what to do with his money and having the confidence he needs from years of practice with it.

Remember…repetition is the mother of skill so get your child using money, setting goals and continually learning how money works in the world and you can rest a little easier when they move out, knowing they probably won’t have to move back in again.

For more detail on the Ultimate Allowance (I’m a contribution author) and other ideas of how to give kids allowances, download Allowance Secrets by Amanda Van der Gulik and here’s another blog article that has some great information for you. Visit it here:

Lastly, just remember to do something in terms of teaching your children about money. My final suggestion is to pay them to reach financial books and provide you with a book report. More on that later.