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Ask Amanda: How do I raise financially responsible kids?

As a clinician specializing in financial behavior, Amanda helps people live empowered, engaged, and educated financial lives.

How do you raise financially responsible kids when information, entertainment and stuff is only a click away?

I'm the mother of a 7-year-old boy and 5-year-old girl. Both their father and I grew up in small towns and were raised with chores and weekly allowances. We were each responsible for keeping various parts of the house clean, even after we were old enough to get after-school jobs. We now live in a city where our children have access to everything they could want, we have a housekeeper who helps keep things tidy and we live in a world where information, entertainment and "stuff" are only a click away. We are raising our children in a very different world from the one in which we were raised. How do we teach our children to be financially responsible?

Is there any other area of parenting as confusing as teaching children about money? It's almost enough to make you yearn for the simple exhaustion of sleep training.

It sounds like you and your husband appreciate what your parents taught you about hard work and responsibility, but now you're having a hard time translating those lessons into your current lifestyle. Many of us are in this boat, and whether our grown-up lives are different because of technology, geography, different careers or different family structure, it means we can't simply follow the same guidelines we had as kids.

Luckily, raising financially healthy children isn't something you do by following the right "system." You and your husband may feel exiled in Affluenzaville, but you can still create a healthy financial environment for your kids no matter how much money you have (or don't have) by focusing on four things.

Photo credit: vitapix/iStock/360/Getty Images

1. Messaging

Children are hardwired to be sensitive to their caregivers' emotions, and nothing tends to push grown-ups' buttons like money. I've worked with many people who are hamstrung well into their adult years by their own parents' mixed or negative messages on the subject. If money discussions between you and your spouse usually lead to arguments, children will learn that it's better to avoid it altogether. Even throwaway comments that have little to do with money, like, "Look at that jerk in the Mercedes. Driving like he thinks he owns the road," can be filed away as There is something bad about people who can afford nice cars. If you want to raise children who will be able to earn and negotiate for the top value of their work, set financial goals and communicate openly about money with friends and partners, then frame it as a positive thing.

2. Mechanics

Children often have some far-out ideas about how money works. When my husband was a child he though the bank was a "money store," and if you ran out of money you could just go back there for more. As parents, we need to make sure our kids have an accurate understanding of how people get money, how they manage it, why it's important to save, and why it's important to give.

I find that creating opportunities for them to be naturally curious is more effective than trying teach a lesson on the topic. Engage them in your financial tasks to see what they know and need to know. Look for age-appropriate ways to share how you're saving for a vacation or college (or paying off debt). See what they're curious about, and then you'll know when they're ready for an allowance, being paid for chores or raising money for charity.

3. Modeling

The most effective method for teaching financial responsibility is to model that behavior ourselves. This doesn't mean we have to be perfect, but it does mean thinking about how things look from our children’s perspective and either working to clean up our behavior or at least provide some context for it. For example, if you worry that your kids will get the wrong idea from the fact that your house is a daily FedEx stop, you can either cut down on online shopping or let them know that the purchases you make stay within your family budget.

4. Maturity

Financial maturity is the foundation of healthy behavior with money, and it develops from experience, not advice. Being financially mature means being able to do three things:

  • Gather the information needed to make an informed choice
  • Weigh options and consequences without getting overwhelmed
  • Delay gratification in order to work toward larger goals.

Helping children develop financial maturity means teaching them how to curb their impulses, but doing so in a loving, non-shaming way. It's perfectly normal for a child to want to spend money on whatever bright, shiny thing catches her attention. Telling her, "stop being selfish," or "that’s a waste of money," sends the message that she can't trust her own feelings. Instead, reinforce her power of choice while helping her weigh options. Something like, "Wow, that's tempting to use some of your allowance to buy that colored pencil set. But I know you said you were trying to save for an American Girl Doll, and if you buy the pencils you won't be able to buy the doll for another three weeks. What do you think you want to do?" And then step out of the way, because whether she gets the pencils and delays the doll is up to her. You support the process, and the consequences she experiences will teach her the lesson.

Your children will have ups and downs as they figure out the role that money will play in their lives. The fact that you're really taking this seriously is the best evidence that you'll do a great job, just like your parents.

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