If you're a parent, you know how important it is to not only tell your kids how to do something, but to show them how to do it as well. It's like putting a plate of vegetables in front of your children every night -- they won't truly adopt those healthy eating habits unless they see you eating your own share of the veggies.
Money management isn't very different from those veggie battles. Your children will learn by watching you, but they'll benefit even more by trying out age-appropriate money management skills themselves.
Here are seven ways to help them along the way:
1. Build math and money skills early. By playing "store" with your kids, they'll learn about denominations, and the relationship between money and what it buys. Graduate to having them make small purchases -- handing the cashier the item and the money, and then receiving the change -- when you're out shopping.
2. Nurture independence. Provide an allowance for your children, and clear guidelines about what kinds of purchases they're now expected to make (younger children, for example, could be asked to pay for their own comic books). If you tie the allowance to household chores or extra odd jobs, be clear -- and consistent -- about the connection between the job and the allowance.
3. Boost responsibility. Talk to your kids about dividing their money into "spend" and "save" jars. Let them decide how much to save, and help them see their savings grow by drawing a tower or tree -- color it in as more money is "deposited." Have them open a bank account as soon as your financial institution allows it, and let them deposit the money themselves. Consider a savings "incentive," where they'll earn an extra dollar from you, for example, for every five dollars they save.
4. Allow them to learn by making mistakes. Some families set rules for spending, but even within those rules, let the kids make their mistakes. Learning when they're young that if they spend all of their money right away, there's no more until the next "allowance" day, reduces the chances that they'll make that mistake as an adult with "pay" days. Resist the urge to fix their mistakes by providing more money.
5. Encourage decision-making skills. Include the kids in real-life, age-appropriate money decisions. Younger children, for example, could help to choose the family's next board game purchase: perhaps give them a $20 bill, and supervise them as they research which game they'd like, and can afford -- then visit the store with your kids, and have them purchase the game with that $20.
6. Teach compassion. Talk your kids about putting a small amount of their allowance away each time, to share with less fortunate children. Help them to choose a charity, and to save and keep track of the funds -- then take your kids to the charity's office, to make their donation and receive a thank-you in return. (It can help to call the charity ahead of time, to make sure that staff have a little time available to spend with your kids, to reinforce how they're helping out.)
7. Set a great example. Kids need to manage their own dollars and cents in order to really understand how money works, but they also need to see the adults in their lives making sound money decisions. If you need to brush up on your own skills, talk to a financial counselor at your local family resource center -- their advice will not only be helpful, it's also free.
Stanley J. Kershman is The Debt Doctor. A leading authority on solving financial disasters, he has been helping people get out of debt for more than 25 years. He's also the author of Put Your Debt on a Diet: A Step-by-Step Guide to Financial Fitness (Pepper Pike Press), a practical handbook that walks you through the process of improving your money management skills. For free copies of Stanley's handy budgeting worksheets, visit www.debtonadiet.com.