Parents role as a financial mentorPosted: Updated:
There are many tools and resources available to help teach kids about money such as board games and online activities, but the one consistent resource is parents. A recent survey conducted by Money Management International (MMI), on kids and money, found that nearly a fifth of respondents admit to learning about managing money from their parents, and an equal number will teach their kids financial literacy. Additionally, 41 percent of respondents in a recent survey conducted by the National Foundation for Credit Counseling said they also learned financial skills from their parents.
Most kids learn by example. If parents spend money freely, their children are likely to follow in their footsteps and become spendthrifts themselves. While parents may use outside sources to help teach financial skills, it’s important to remember that leading by example will have the strongest impact. Good financial habits encourage healthy financial behavior. The financial experts at MMI offer the following tips on how parents can set the stage as good financial mentors.
Establish a bank account for your child. Three times as many children under the age of 10 now have bank accounts than their parents did at the same age, according to MMI’s survey. Owning a bank account is a sign of financial independence and maturity. This will help your child understand and see the value in saving and establish good early financial habits on spending and saving.
Relinquish control over finances. Parents have the power to choose the amount and how often their kids receive an allowance. To help teach your kids financial independence consider allowing children to decide how and what they spend their money on. MMI’s survey found that 49 percent of parents give their children either full or partial control of how they choose to spend allowance. Allowing children to decide how to spend money will establish trust between you and your children and, depending on the age, it gives kids a self-learning experience.
Help kids set financial goals. While you may trust your kids to responsibly handle finances, it is certainly acceptable to also help guide them in the right direction. Sit down with them and help them plan their spending and saving. Teach them to budget for major purchases. When children learn to set financial goals they are better at planning and are less likely to overspend.
Have your own success story. The best way to be a financial mentor is to have a success story of your own. Share examples of positive spending habits with your kids so they can see the big picture of effectively managing money. Set a good example for your kids so they will have a platform for their own financial success.
Finally, parents wear the hat of a role model in many areas of their child’s life. Being a financial mentor shouldn’t be any different. Good financial habits should start at home just as good etiquette.