How to Teach Your Children to Save Money

Lessons to an Early Start in Future Finances

by Carrie Ardelean

Society is working overtime to addict our children to spending in. We have let ourselves become victims of a consumer culture where our children have learned that, whether we go from shopping mall to shopping mall or surf the Internet, we can buy anything we want, 24 hours a day.

We are such a consumer culture that now it is normal to shop for debt. Between refinancing houses and buying second mortgages, debt is now a product.

Over the past 10 years, credit card debt among 18-24 year-olds has risen by 104 percent, according to a report released by the nonprofit research organization, Demos, titled "Generation Broke: The Growth of Debt Among Young Americans." Only 56 percent of U.S. households have any type of savings, leaving 44 percent having no savings at all.

And even with these alarming statistics there are only seven states in the country that mandate students take a course in basic finance to graduate from high school.

So before we release our children into this "consumer culture," how are we going to equip them for the financial decisions they will have to make in life? Parents hold the key to whether the next generation will succeed or fail when it comes to their finances. If you plan to teach your children anything about saving and budgeting in a consumer culture make the starting point your own financial situation.

There are three things you can do to start teaching your children about money:

Stop enabling. Parents want to make sure their children get everything they had or didn't have. There may be a lot of comfort in this method of providing, but in the end the teen turns into an adult who has no clue how to manage money and feels the solution for depression, a bad day at work, or a fight with a spouse can be solved with a credit card. Enabling, or providing comfort to the child in tough times, could be the worst way to model how to handle money. Watching a child suffer through a financial struggle may be difficult, but the lessons they learn will give them a better chance at financial success.

School is a job. One of the most important lessons you can teach a child about finances is that you have to earn it. Everyone has a job. That's how you are able to fund your living, and it should be no different for your child. You can start teaching them about the value of work at a young age by teaching them that "school is your job." Nowhere is it written that parents must pay for their child's education. Children and teens must be taught that, to have opportunities, they must get an education, and it must be earned. They can earn it through good grades, community service, or physical and academic abilities, all of which lead to scholarship money, thus earning their education. How hard your child works will determine the level of reward.

Follow the leader. Your children will most likely follow exactly what you do when it comes to finances. If they always see you use credit cards, they will use them, too. If they always see you write checks, they will use checks. If they see you use cash, they will be more prone to use cash. If you demonstrate to your child how to live life beyond your means, they will mimic this the best way they can. You are the leader. When it comes to teaching your children about finances, the best thing you can do is live it in front of them. If you are planning a family vacation, you can involve your children in the "saving" process for the vacation. This may involve not ordering pizza on Friday nights or having a family garage sale. Talk with your teens about how you plan to invest your money, what program you are on to eliminate your debt, and how you plan to save for retirement. Let them see your struggles and successes. It's one of the best lessons you can give them before releasing them to our "consumer culture" society.