After becoming a parent about six years ago, I started to ask myself a simple question, “how do I raise my kids to be financially responsible individuals?” In general, I know that it’s important to be a nurturing and supportive parent to our kids. Providing them with the best environment that we could possibly afford so that they can grow up to be happy and healthy individuals. Being the personal finance enthusiast that I am, raising happy and healthy kids is not enough. I want to raise financially responsible kids by providing them with all the basic money skills that I mentioned in my financial literacy and saving a million dollar posts.
My Family’s Financial Struggles
I grew up in a low-income immigrant family with very little extra money to spend on discretionary items. I learned at a very young age that earning a decent income is difficult, especially if you don’t speak the country’s national language nor have any high demand skills. I had seen the financial struggles that my parents went through firsthand. I didn’t want to go through the same financial struggles myself nor will I want my kids to. However, I do want my kids to learn the important financial lessons that came with those early struggles.
The Indirect Financial Lesson
With a minimal educational background and very little spare time outside of work, my parents did not have many opportunities to teach me any money skills. However, I did spend a lot of time with my mom going to grocery shopping when I was young (we had to walk quite a distance to the grocery store and carry all of our groceries home by hand every week). I would observe how she would spend her money and seeing her make financial decisions that would impact our family’s finance. Even though there was no direct lesson, I learned the importance of making choices, spending wisely and responsibly.
The Disciplined and Money Conscious Mindset
From a very young age, I developed a very disciplined and money conscious mindset. Whenever I wanted something, I would prefer to earn it myself rather than asking my parents to give it to me. I understood that my parents don’t make a lot of money and I shouldn’t ask them for unnecessary toys or treats. It took quite a few “nos” from my parents in order for me to understood my family’s financial situation but, I understood it and had never forgotten that. Plus, every time that I bought something for myself, it gave me a great sense of satisfaction that no free items can ever match. I had great pride in earning all my keeps.
Learning Through Observations
I learned through observing my parents when I was young. Now I started to see my kids learning things by observing my actions. Recently, I’ve come across a parenting article by Gail Vaz-Oxlade that mentioned kids learned their money habits from observing their parents. Both, the goods and the bads. After reflecting on my own experience, I think that Gail Vaz-Oxlade is absolutely right. This reminds me that if I want to raise my kids to be financially responsible individuals I need to demonstrate to them that I am also being financially responsible. I need to show more of my good habits and communicate the bad habits that should be avoided.
Encourage Your Kids To Save For Their Purchase
A while ago, I had the pleasure of reading Freedom 40 Plan‘s post on how his mom had greatly influenced his money habits at a young age. His mom encouraged him to save his allowance to purchase items that he wanted instead of asking for it. I think that method is a great way to plant the financially responsible seed into a young child’s behaviour. Hopefully, I can do the same with my children when they are old enough – without having to brainwash them.
Encourage Your Kids To Give Generously
Last year, I was part of the Autism In Mind Children’s Charity‘s Toonie For Autism fundraising campaign at a local church. When I was accepting donations from one of the families at the church, the father asked his daughters how much they would like to donate to our fundraising campaign. He would lend his daughters the money to donate and the girls’ donated amount will be paid back using their allowances. At that moment, I thought that the father was doing a brilliant job to encourage his daughters to give generously to charity. At the same time, they were also learning the concept of debt. Afterward, I told myself that one day, I’ve got to use this great trick to teach my kid to give generously too.
The Bad Cop
Being a parent of two young children, I’ve gone to a lot of parties, children’s birthday parties mostly. From time to time, I’d see one kid in the crowd that was behaving a little too mischievous and they got away with it. For my kids, I am always the bad cop parent who’s on the lookout and won’t let my children misbehave in any environment. I somehow inherit the bad cop parent role naturally and I know for a fact that I am not my kids’ favourite parent. That’s okay. I’d rather be the bad cop parent than to be the parent of badly behaving kids. I strongly believe that at least one parent needs to hold their kids responsible for their actions.
Let Your Kid Fail
I am quite protective of my kids, but I’ll never be the helicopter parent in Go Finance Yourself’s post. In fact, I believe that important financial lessons in life are taught through experience. I prefer to let my kids fail at a young age and learn from that experience rather than to have them fail later in life. For example, if my kids want to spend all their allowances on an expensive toy, I would let them purchase that toy. If they have buyer’s remorse, I’ll just tell them it’s a decision that they made and they need to accept responsibility for it. This way, they’ll learn that irresponsible financial behaviours will cost them dearly. Hopefully, the lesson will encourage them to manage their finance responsibly when they grow up. Also, daddy won’t bail them out for everything.
My Two Cents
Raising kids in today’s environment is tough. It’s even tougher to raise financially responsible kids with good money habits. Hence I think that it’s best to start teaching them about finance at a young age. Let then learn through experience and guide them to the correct path when they make mistakes. Be a role model and show them how you manage your finance responsibly. They’ll want to follow in your footstep.
So what financial lessons did you learn from your parent? If you plan to have kids or you already kids, what financial lessons do you want your kids to learn?