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Thursday, May 08, 2014

How to Talk to Your Kids About Money

Financial experts Dave Ramsey and his daughter Rachel Cruze, best-selling authors of ‘Smart Money Smart Kids, Raising the Next Generation to Win with Money’, were recently on the ‘Katie’ Couric show (4/23/2014) sharing their tips on how to talk to your kids about money.

In their book and on the show, Dave and Rachel teach parents how to raise money-smart kids in a debt-filled world.

Their message helps parents teach their children the basics of money management and experience the value of money through acts of working, spending, saving and giving.

Even our very own Brady Roth, 5 year old grandson of AmpliVox CEO Don Roth, was in on the discussion as the children on the show were asked questions about money, often responding with quite humorous comments.

All too frequently parents do not discuss the topic of money with their children. Teaching your kids the basics of money sets a positive precedence for future decision making. Having money conversations early with your children gives kids the opportunity to develop the skills they will need to be financially independent and responsible in adulthood, to make good choices and to save and spend wisely helping them prepare for the future.

Most adults have problems with money because of habits they developed when they were young. Parents may be inadvertently handing down bad habits to the next generation by not introducing concepts of building wealth, beating debt, and making smarter decisions with money by understanding their family's spending habits.

Parents are often scared to talk to their kids about money, for one simple reason: more than 70% of Americans don’t use their money well, and end up living paycheck to paycheck. To keep your children from falling into this same trap, though, you need to talk regularly to your children about money. A few tips on how to talk to your kids:

Set a good example The most important way to talk to your kids about money is by setting a good example. If you aren’t managing your money well, your kids are going to pick up those same habits.

So, make sure you follow the advice you give your kids, what your kids see you do is a lot more powerful than what they hear you say.

The strongest impact on children is when they hear and see a consistent message from their parents on how to spend and save.

Stick to a budget (and talk to your kids about the budget)
Set a monthly (or weekly) budget, and stick to it. If you are saving up for your children’s college education, talk to them about that, and make sure you stick to your budget.

Take your kids along when shopping for groceries or making purchases for the home, talking to them about the value and cost of different items.

Don’t be afraid to tell your children that what they want isn’t in the budget, and talk to them about what the budget is.

Don’t teach kids it’s okay to have debt One of the latest crazes is getting credit cards for teenagers to teach them how to use credit responsibly. Unfortunately, this teaches them that it’s okay to go into debt! Instead, teach them how to save their money for a car or for college. Teaching kids how to save disciplines them to set and reach their own goals.

Teach kids to use cash instead of debit cards Credit cards for your kids or teenagers are a bad idea, but what about debit cards? Debit cards are a great way for kids to have access to their money, but make sure they’re using them right. Don’t use the debit card to pay for purchases; instead, take your weekly or monthly budget for cash, and use cash to pay for your purchases. Cash has more emotional value to it, so your kids are more likely to think about their purchases when they’re using cash.

Teach kids that when the money is gone, it’s gone
It’s a simple concept, right? When it’s gone, it’s gone. However, many kids don’t get that concept, because Mom and Dad are always there with more money. Stop that! Teach your kids that once they have spent their allowance, they don’t have any more money until their next allowance. It might be hard, but it will teach them to better value and spend their money.

These simple, but far from easy, tips will teach your children just about everything they need to know about money. At least, for now. When they get older, you should talk to them about retirement plans and so forth, but instill in them early on the value of money and the talks later will be much easier. Most importantly, walk the talk!