It's never too early to start helping our children learn valuable habits that will set them up for success in the future. I'd argue that the sooner we start, the better! So take it one step, one concept, one principle at a time. Combine teaching moments with opportunities to put the theory into practice and soon you'll start seeing the fruit of your hard labor.
There are only two lasting bequests
we can hope to give our children.
One of these is roots, the other, wings.
— Hodding Carter

Allow me to start off with a few questions.

How can parents, who have shown no or little restraint with money management, raise a financially savvy and successful future generation? Is there hope for our little ones to become better stewards of their financial resources than we have shown to be?

Before answering these questions, let's look at a few stats that depict the financial situation of an average parent today.

Based on the latest government data, the average household in America owes $7,120 just on credit cards.

Based on the latest government data, the average household in America owes $7,120 just on credit cards. If we look only at deeply indebted households that number rises to a staggering $15,263.

According to the Bureau of Labor Statistics, on average American household spends 36.9 percent of their gross annual income on rent/mortgage and utilities — which means we buy more home than we can afford.

Finally, we are eating away our financial future by spending 5.7 percent of our annual income on restaurants (this does not include regular grocery shopping) and we save a whopping 2.6 percent to 3 percent of our income. Bottom line, we prefer the instant gratification of food rather than securing our financial future.

So let's go back to my initial questions. Is there hope for our up and coming generations? Can we do something to spare them the economic pain in which we find ourselves?

The answer is, yes, as long as we as parents commit to changing our destructive financial habits and to being intentional and consistent in helping our children learn and apply financial wisdom.

When it comes to financial education, there are two primary aspects upon which we should focus. One is teaching our young ones solid financial principles and practices. The other is helping them learn a strong work ethic and providing them with opportunities to start generating income, even as early as age 4 or 5.

Here are a few practical ways you can help your child mature into a wise and financially responsible adult.

Teach them to give

Generosity is one of the best ways to gain a proper and balanced attitude toward money. There are many studies that show generous people live much happier, content and fulfilled lives. The ability to share with others and to show gratitude will help your child understand that money is simply a resource to be managed. So every time they earn an allowance, teach them to set aside a portion for something other than themselves. Maybe there is a special project in your community they would enjoy giving to, or a family in need? Allow them to come up with creative ideas for sharing financial resources and watch how those small acts of generosity shape them as a person. Talk to them about things you are grateful for and why.

Teach them to save

pink piggy bankThis is your opportunity to help them learn delayed gratification — saying no to the good now so they can say yes to the best later! Based on Stanford University research, children who learn to delay gratification at an early age have a much better chance for success as adults. Label three jars as Give, Save, Spend. Every time allowance is earned or birthday money is received, teach them to save a portion of that income. Savings can be used to purchase bigger items they really want but require a much larger sum of money. It can also be used for teaching investment principles. Developing the habit of saving and patiently waiting will prevent them from becoming impulsive and emotional spenders.

Let them decide

You must also allow them to experience the consequences of bad financial decisions.

This is a hard one — allowing your children to make decisions with their earned money. This is only half the battle. You must also allow them to experience the consequences of bad financial decisions. No bailouts allowed! If your child wants to spend their money on a silly toy just because they have to have something now, let them, but also teach them that the toy they really wanted can't be bought until they save for it. This is a great way to help them understand that in life we make choices, and those choices have real consequences.

Let them earn it

Access to "easy money" may prevent them from learning this valuable lesson. Help your children understand that certain responsibilities like cleaning their room, making their beds and clearing dishes from the table after dinner are just part of daily life. If they want to earn money, there are specific jobs outside of the regular "life routine" they can do. Create your own "job" list, name the price for each job and let them enjoy earning the money. Make it fun, make it visual and make it rewarding!

Weekly reward system

young boy sweeping the floorA simple way to start would be to teach your children to take care of their space. Let them own their room and their bathroom. Create a daily and a weekly work chart where you can check off responsibilities like making the bed, picking up the toys, putting their dirty clothes in the hamper, etc. Weekly routines could include taking the trash bag out of the trash can and dusting. Establish a reward system where on a weekly basis your child gets the opportunity to earn a "job well done" reward. Be careful how you establish the reward system since you don't want your child to assume that every time they make the bed or pick up toys they should expect a payment. Rather it should be a reward where only when expectations are met, the reward is received.

Serving others

Meal times can be a great way to give your child the opportunity to work beyond their own space and serve others at the house. How about asking them to clear off the table by bringing all of the dirty dishes back to the kitchen? Not just their own but everyone's. Sure they may need some extra assistance from your side, or from their older siblings at the beginning, but sooner than you know it, they'll be able to complete these tasks on their own.

About the author^

Steve Smith author headshot

Steve Smith is the CEO of Finicity, the maker of Mvelopes budgeting software. He has strong strategic and tactical business skills and combines them with a passion to develop products and services that make a positive difference in people's lives. Prior to co-founding Finicity™, Steve served as a senior member of the executive team at Megahertz Corporation, the world's leading supplier of data communication products for mobile computers. At the close of his nine-year tenure, Megahertz had more than 1,200 employees and claimed more than 50 percent of the North American PC Card market. Most recently, Steve led the acquisition and management of an industrial engineering and manufacturing firm with offices in Canada, Europe and the U.S. Under his direction, the company became a leading supplier of critical service control equipment for chemical and petrochemical plants. Steve holds a Bachelor of Science degree in Finance from the University of Utah.

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