49. Teach Your Kids Fiscal Responsibility

I have a friend who recently found herself in reduced circumstances because of a divorce. As part of the divorce settlement she agreed to give up her high-powered foreign car, and to buy a somewhat more modest set of wheels. She took her ten-year-old son with her to pick out the new car and ended up, at her son’s importunate urging, buying the most expensive model with leather seats, pinstriping, and, for an additional fifteen hundred dollars, gold trim. She was lamenting that she had spent all this extra money because she hadn’t been able to tell her son that she couldn’t afford it.

We all want the best for our children, and certainly there are times when it’s hard to say no. But I can’t help but wonder what kind of lessons we are teaching our kids by spending money on glitz and glitter “image builders,” especially when we can’t afford them.

As we are forging new spending habits for ourselves, either by desire or necessity or both, we should also be building sensible buying habits for our kids. Children are adaptable, and can learn to adjust quite well to a reasonable set of limits. We just have to make sure they know what the limits are.

Teach your kids to save half of what they earn from their allowance or part-time jobs. Kids can learn, just as we are learning, that we don’t have to have everything we see or everything the Joneses have. Kids can learn, just as we are learning, that there are options: if they get the gold trim on the car they can’t have the new dirt bike. Kids can learn how to budget so their expenses don’t exceed their income. Kids can learn, as we are learning, how advertisers appeal to our emotions rather than our needs. Kids can learn that if they don’t have the money, they can’t afford it, and that buying on credit can often lead to serious financial difficulties.

Teaching our kids how to handle their money is one of the most powerful gifts we can give them. And not only will it ultimately simplify their lives, but it’ll simplify our lives, too.