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Topics: Finance For Kids |
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| Teaching Kids How to be Frugal |
Submitted by:
Ray / Tip Hero 07/29/2008 3:41 AM
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 A friend of mine was telling me recently how he just had his personal finances reviewed by a professional financial advisor. The advisor was surprised to see how much he had saved and commented that other clients with similar incomes typically had fancier cars, houses, and much more debt. The advisor asked my friend how he became so frugal. I immediately knew the answer to his question. Sometimes the fruit doesn’t fall far from the tree--my friend was raised by two frugal minded mid-westerners who knew the value of a dollar and passed on their values to their son.
As children we pick up a lot of our fiscal habits from our parents. My mother used to follow me around the house turning off lights that I had left on telling me how she wasn’t put on this earth to make the electric company any richer. My parents lectured me on the importance of savings and how if someone had savings they would have a lot less stress in life. They told me stories about the Great Depression and that in good times we must save for the inevitable rainy days that come.
Parents are the most important financial educators children have. Unfortunately today parents are competing with peer pressure and a media that glorifies consumption and tries to tie self worth to material possessions. However, there are things parents can do to pass on good financial habits to their children.
Here are a few personal finance lessons I learned from my parents:
Self Worth: One of the most important lessons my parents taught me was not to derive my sense of self worth from material possessions or how much money I had in the bank. They likened this to building your house on a foundation of sand. They talked about people who made the acquisition of material possessions the center of their lives and how miserable they ended up becoming. On the flipside they also taught me never to measure a person by their net worth, but instead by their integrity and work ethic. They warned of the dangers of trying to keep up with the Jones’.
Lead by Example: My parents always led by example. They were always frugal never buying new cars, always paying with cash, shunning debt. They were always saving and putting money away for a rainy day. I developed a lot of my frugal habits simply by watching my parents.
Long Term Savings: Consider starting long term savings accounts for each of your kids that are not to be touched until they reach 18. My friend’s grandmother would buy him US savings bonds each year for his birthday. I’m sure he would have rather received cash to go out and spend on video games but when all those bonds finally matured he was thankful to have a nice little savings account. He understood the lesson his grandmother was trying to teach him, it stuck, and he became a life long saver.
Talk about Money: My parents would talk about money matters in the home. They were always educating us about personal finance. They discussed the importance of being thrifty and saving. They discussed financial mistakes they and others had made so I would not repeat them. I remember my mother telling me that having a savings cushion was like going through life with the wind at your back and accumulating too much debt was like having the wind constantly in your face.
By talking about money in the home I grew more comfortable with the subject and learned some invaluable lessons. However, I do not recommend sharing everything with your children like debt problems or net worth. My parents mainly talked about general lessons they had learned through their own experience and by watching others. They also adjusted the content of their talks based on how old we were.
Reading: My parents always stressed the importance of reading and educating myself. In my teens I started reading biographies of successful people and personal finance books. I remember reading The Richest Man in Babylon which taught about the importance of compound interest. (Incidentally Warren Buffett read this book as a child too, he’s doing a little better financially though ;>) The education system does not prepare students very well for the personal finance issues students face when they enter the real world. This is why it’s important to get them in the habit of reading.
I later went on to get a degree in finance in college but I would never trade in the education I received from my parents for my finance degree. It has had a greater impact on my financial thinking than the countless number of textbooks I’ve read.
Photo credit: theritters |
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