Kids and Money: Setting Clear Expectations


Take the time to talk to your kids about setting priorities.


When your kids are old enough to talk back to you, it’s time to start teaching them about money and finances. Don’t wait until they graduate from high school and head off to college. By then, you’ll have missed an incredible opportunity. Our saving and spending habits begin in early childhood. That means building a better future is all about equipping kids with the right tools from the get-go.


Missed Goals And Opportunities


It's never too early to start teaching your children about money and finances.

Parents play a huge roll in shaping their kids expectations--whether they want to or not.

Many kids grow up with an expectation that Mom or Dad will bail them out of a financial jam if and when the need arises. Though most of us would do almost anything to help our children, it’s often our inability to say no today that leads to the next problem down the road. As parents, when we fail to set clear boundaries, guidelines, and expectations, we set our kids up to repeat dysfunctional patterns. It’s those patterns that can take a huge toll in terms of a child’s ability to cope with and manage problems over a  lifetime.


It’s easy to forget that young children are like sponges. They soak up everything we say and do and then copy us. This is only natural, since in their eyes we can do no wrong. Thus, the first goal of a responsible parent is to put our own affairs in order. When we do that, we don’t need to worry about the things our kids will soak up just because they hang around.


Learning How To Save Money


I remember when my boys were little. It wasn't that long ago.

Our kids grow up far too fast. Don't wait to tell them the things that will make life easier.

Unfortunately, even the most financially responsible parents can still fail their kids if they don’t share their knowledge of money or how the world works. It’s far better to start at an early age and teach them how to budget and plan for expenses.


If you give your child an allowance, you can have them put some of it aside. If they want to buy something, only allow them to access a part of that savings. In doing that you show them how to maintain an emergency fund.


As they get older and take on first jobs, continue to have them set aside a portion of their income in savings. Tell them a certain percent applies to college, a certain percent to emergencies and rest is the money available for buying the things they want or enjoy. However, occasionally have them kick in for some basic household expense. For example, ask them to buy a pizza for a family dinner or fill up the family car with gasoline. Not only will this give them a sense of accomplishment and self-worth for helping to provide for the family, but they’ll begin to appreciate the financial stakes involved. And with any luck, they’ll learn the value of not blowing all their cash in one place.


By the way, if your grown children frequently come to ask for money, there’s nothing wrong with putting your needs first. For example, if you’re coming up on retirement and your savings are already stressed or insufficient, you may need to draw the line and tell your kids to suck it up. For more on this topic read, “Plan For Retirement Now”.


Rewarding Effort


The Adventures of Javabird continue.

Does your child have a reasonable expectation for the value of an education?

One of the best things you can teach young children or grandchildren is how to save. Learning to save requires developing a sense of discipline and willpower, and that requires a certain amount of effort from both parent and child. Thankfully, the rewards of saving can be exciting—there’s nothing quite like it when a child reaches a savings goal and is allowed to spend a portion of their money on something special. One practice that can really encourage a child to save is to offer a bonus if they meet a certain savings goal. If you’re interested in more information on this topic, read our posts “Teach Your Kids To Save” and “How Much Should I Save Every Month”.


Applying For A First Credit Card


Handling credit is tricky. For many adults, it’s hard to teach kids the dangers of using credit when they struggle with too much debt themselves. Nevertheless, credit is one topic that should be continually addressed as the kids grow older. Be sure you show them what makes a good or bad credit habit and then translate how either impacts their financial future. For example, show them how you set up your bills to be paid automatically so you never miss a payment and are never charged a late fee.



It’s by no means a given children should be handed credit cards. Yet as long as a particular child is under your control and is generally responsible, having their own card may be a terrific learning opportunity. However, it’s critical to carefully consider the risks first and then monitor all credit activity as you go.


What are some potential advantages of giving a child a credit card? You can:


• Demonstrate first hand how credit cards work

• Teach kids how interest on debt makes buying more expensive

• Teach kids good habits for paying off debt

• Guide kids on how much debt to take on

• Explore the risks of taking on too much debt

• Show kids the best way to improve their credit score


It's important to instill good habits in kids.

Make sure your kids understand the difference between buying with cash and buying with credit. They'll end up saving thousands.

One note: Even if your child has sufficient income of their own, you’ll want to be absolutely clear about establishing a strict credit limit. If you haven’t seen them yet, read “Your Credit: Keeping Score” and “Debt Relief: 2 Solutions That Work”.


Saving Money For College versus Student Loans


Make no mistake: With over 1 trillion dollars of student debt hanging over their heads, our youngest citizens carry a huge financial burden—one bound to have a significant impact on their ability to accumulate wealth over the course of their lifetimes.


Seeing your child graduate from college is exciting, but make sure it's worth the money your spent.

Kids grow up in the blink of an eye. Don't wait: Start saving and setting reasonable expectations for college when the kids are still young.

The promise of a college education is only as good as a society’s ability to provide jobs for its graduates. As it stands, far too many kids are getting the wrong messages about paying for school, especially as a large percentage of those who take out student loans end up paying them off in their middle years and beyond. Yes, you can go into debt to get an education, but the real question is always whether you should.


Setting fiscally sound goals around college and education is an important first step to protect your own finances as well as that of your kids. If you expect to pay their way, at least teach them an appreciation for the gift being offered—it’s huge. If you can’t afford to pay for college, do what you can to help beef up their savings or encourage them to take on jobs as they come into their teens. There is no single right answer on this question as everyone comes from a different background. However, there is also no set rule that says you or your child needs to take on significant debt just to get an education. For several ideas on how to save money on education, read our “Great Savings Tip #97 – Save On A College Education.”


Setting High Expectations


The innocence of childhood can be shattered by the harsh realities of life. Prepare your kids.

Prepare your kids for life. The goal isn't too scare them, but teach responsible habits.

Kids are born free of the burdens of our world, but the sooner they learn how to handle money, the better prepared you can expect them to be for the challenges ahead. When teaching kids about money the idea isn’t to create unneeded stress and anxiety, but to ingrain healthy saving and spending habits that will serve them the rest of their lives.


If you want your children to succeed financially, start by putting your own financial future on a firm footing first. Then take the kids aside on a regular basis to talk about money. As you do, challenge and assist them in setting and achieving all their financial goals. Don’t be afraid to talk about money, or to admit to mistakes you made along the way. In doing that, you’ll teach them honesty and open the lines of communication. And hopefully, that will give them the permission they need to come and talk to you before getting deep into a jam of their own.

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