How to Teach your Children to Manage Money

As a mother of four children, separated and all, I take my responsibilities seriously.  At an early age, I wanted my children to be aware of money; How to keep money; How to spend wisely; And how to make more money.  I have discussed previously the benefits of discussing your money issues with your children.  I have a 5 and 7 year old and  they are both in school and unlike most parents in the province, I have been giving my children their weekly allowance every Monday and I expect them to stretch that allowance until Friday unless they needed to use their allowance to pay for some supplies or school related expense like paying monthly dues in homeroom. I also make a big deal of refunding my children’s allowance when they needed to use some of their allowance to pay for their monthly dues.

The problem with us Filipinos is sometimes were are too touchy and be tend to avoid discussing money issues even among families.  I was born in a very traditional home where my parents never discussed money problems with us children.  I have brought that up with my father years ago and his response was that he didn’t want us to be aware of any money issues because he can take care of that himself.  He said it with so much pride and even with dignity that I did not have the heart to argue and voice out my thoughts.  What’s the point?  The important thing is that I did not want to pass that kind of behavior and attitude towards money to my children.  That as a parent, I needed to be aware that I owe it to my children to prepare them and mold them to be responsible people.

So where should you start?

Give them an allowance. By giving your children an allowance you are giving them the chance to learn how to manage their cash.  For them to be responsible, discuss and inform them your expectations.  Ie, that if they finish their allowance before Friday, there is no way you are giving them more spending money. Be firm with your rules and enforce them.  Be firm and consistent.  Sometimes children both young and old can be crafty and absolutely know how to manipulate you or the situation  to their advantage so they can get more cash from you.  But as soon as they realize that you are serious, then they hopefully will not waste more time thinking of schemes to get you to increase their allowance but instead would put more effort on how to spend their money wisely.

Help them open their first savings account.  I took both my daugher to the local cooperative bank.  Since it is FICCO, I shelled out P150 to open their first bank account.  One of the advantages of opening an account at the local cooperative than the local banks is that the minimum amount required for opening an account is lower but the interest rate is higher than the local commercial banks.  Currently, the minimum amount required for a kiddie account in FICCO is P50.  They filled out the forms themselves.  I also taught them how to fill out the deposit slips and my daughters excitedly handed over their deposits slips with their new passbooks to the teller.  It was momentous and it has been months since their second deposit.

Reward achievements with money.  This is something I have learned from a close friend.  Betty said that one of the ways to help children to be responsible with money as well as strive higher in school is to reward them with cash.  I know this is dowright controversial.   According to child psychologist Sylvia Rimm when it comes to high-achieving students, money doesn’t matter. And, Rimm says, kids who are underachievers fail because they’re inconsistent. So if they slip and get a poor grade, they figure that they’re not going to get the reward and give up. Even worse, parents sometimes end up paying them for half measures and the system backfires.  I have read several blogs that has ranted against this kind of rewards system, but lets be honest, when you do work hard at work, you do get compensated with money, and one way for them to strive better in school is to reward them monetarily.  Anway, to stay true to my own rules, I rewarded by daughters P500 each for making it to the honor roll.  I told them that if they get better grades next year, they will be rewarded double.

Being Filipino, I noticed that parents usually reward achievements by rewarding children with food or toys.  I find nothing wrong with this except that we are teaching our children that when they get good grades we needed to give them toys, gadgets and such.  Bottomline, we needed reinforce good behavior and be able to create a good link between performance and compensation.

The earlier we instill the value of money and the importance of saving including the need to wait and patience before spending money is imperative.  My children has taught me that children are indeed ready to learn about money as soon as they’re old enough not to swallow it. And increasingly the evidence suggests that we shouldn’t wait to begin teaching them.  It is the habit of saving is one of the important money lessons that we needed to teach our children.  According to Sam Renick, a former financial services executive whose company, It’s a Habit, publishes money books and music for kids. Parents need to push back against those messages, he said, and teach kids the basics “before they’re too cool” to listen.

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