How to Make Money Management a Family Affair

by Millionaire Mommy Next Door on May 14, 2009

in How To Guide,Raising Money-Smart Kids

We are raised to believe that talking about money is rude, embarrassing or boastful. But where has this belief gotten us? Without open discussion, money management often becomes a mysterious and difficult task, causing strife in our lives and relationships.

Our children learn from our example. If we behave as though money management is painful, secretive or confusing, we thwart our child’s financial future. Is this what we want for our kid? Of course not. We all want our children to acquire the tools necessary to power their own future financial independence. Few high school students graduate with any formal personal finance instruction — children receive the majority of their financial literacy from their parents. Modeling healthy personal finance behaviors is THE key to raising money-savvy children. What are you teaching YOUR kids?

Involving the entire family in financial discussions has many benefits:

  • Money is a sore topic for many families. Open discussion benefits our family relationships.
  • When the entire family is on board, keeping to a budget becomes easy. The family shares a creative, problem-solving energy and everyone feels empowered.
  • Kids think “outside of the box” better than adults do. They will surprise you with their remarkable insights and ideas.
  • Teach your child to save and invest now and you’ll take full advantage of the astounding magic of compounding. To accumulate $1 million by age 65, a 5 year old child only needs a one time contribution of $9875 OR a monthly contribution of only $57! Click here to learn the details.
  • Learning about money can be fun when it’s a family project. Spend some of your family financial meetings playing educational money games. See my list of suggested games below.

So grab your family calendar and schedule a “Money Monday” or “Finance Friday” or whatever works for you and your family. Block out an hour each month. Choose a time that everyone is likely to be relaxed, well-fed and free from other distractions. Consider making this a festive occasion — serve homemade cookies, offer a contest with prizes, or hold your meeting in a tent pitched in your backyard.

What can you do during your family finance meetings? Here are a few suggestions:

1)   Make and review your Treasure Map.
2)   Review your values and priorities, particularly as they relate to money.
3)   Delegate financial tasks to each family member as appropriate: have your youngest sort receipts; one can pay bills; another can reconcile bank statements.
4)   Brainstorm ways to spend less. Avoid blame and guilt trips! Instead, have fun with the challenge: offer incentives and prizes.
5)   Play games that increase financial knowledge and skills. Here are a few suggestions to get you started:

6)   Employ your kids. Give them a wage and valuable work experience for doing extra work around the house. Discuss budgeting and assignment of income into various categories such as: 10% invest / 10% save / 10% charity / 70% spend.
7)   Brainstorm ways to increase your family income with an in-home business. I started my first business at age 12 — a petsitting and dog walking service. I learned valuable entrepreneurial skills, earned money and had fun.
8 )  Invite your child to shadow (observe) you at work.
9)   Invite a mentor or entrepreneur to dinner and conduct an interview. Learn from those you’d like to emulate.
10)  Discuss ways your family can give back to your community. Volunteering not only serves others, it offers your children valuable work experience.
11)  Read age-appropriate books together:

Related books about raising happy, money-savvy kids:
Kids and Money: Giving Them the Savvy to Succeed Financially
How to Raise Millionaire Children

How do you feel about sharing your personal income with your children? Do you have any other family-friendly books or games relating to personal finance that you’d recommend? Do your kids receive an allowance and if so, do they work to earn it?

{ 15 comments… read them below or add one }

Andrea Daly May 15, 2009 at 4:11 am

What an excellent blog! We have three children at home and we’re doing our best to be completely open about money. My eldest is always asking for stuff so I sat down with him and went through our household bills. Once he understood where much of the money is distributed each month, it totally changed his attitude. He’s now looking for a job that he can work around his school hours so that he doesn’t have to keep coming to me!

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KH May 15, 2009 at 10:17 am

I LOVE these ideas! Growing up, my family did weekly, church-related ” family home evening”, but I plan to continue that when I have children with topics like history, current events, life skills, etc. and these ideas will be perfect to include! Thank you for a great post!

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KH May 15, 2009 at 10:36 am

Also, I’ve thought about ways to tell my kids about our actual income. I don’t feel that they need to know the exact numbers. I think it’s just as effective to use the actual percentages, but change the value. For example, if we spend 14% of our income on housing, we could tell them “If we have $5,000 to spend this month, 14% goes to housing, so that leaves $4,300 for other expenses, x, y, and z.”

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Mel May 15, 2009 at 10:54 am

These are excellent ideas. I have never actually thought this subject through. Although I do agree, because my parents never taught me an ounce of financial sense and now I am in debt and poor on top of having 3 kids. I’ll be lucky if I could buy a house for myself in the next 20 years!

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Darlene May 15, 2009 at 11:09 am

Dave Ramsey has a bunch of great kids books, too. And a teenage money program.

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Anna May 15, 2009 at 8:46 pm

Yes, I absolutely agree that teaching kids how to manage money is absolutely necessary, and that it is parents’ responsibility. It does not have to be painfull at all. There’s no need to disclose parents’ income right away. I never knew the exact number of what my parents were making. But my Mom, when we went grocery shopping, always got me involved in choosing the things we bought – their cost, how much we can spend in this particular trip, how long these things will last, etc. Same with bill paying – she asked me to help her with little things, like writing the date, and in the meantime explained how things worked. Nothing formal, just real life shared with kids.

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hustler May 15, 2009 at 11:27 pm

I love this. Growing up we never discussed money ever. I still don’t know my parents income. I struggled for a long time with money management. I think learning about money at a young age will help kids over a large hurdle later on in life.

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Debbie May 16, 2009 at 7:19 am

Can’t tell you how many times I’ve commented about my skills with money, budgeting and being able to afford nice items when I want them is all due to both of my parents teaching me about money. It all came down to saving for what you want, purchasing high quality when you can, and putting a little away each paycheck for all things you know you will have to pay for monthly and yearly. Used to do that on paper with each paycheck but now I do the same thing at mvelopes.com with each paycheck.

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Debbie May 16, 2009 at 7:20 am

Oh almost forgot the biggest lesson was always, always, always put savings at the very top for the money to go to first not last after all the bills were paid.

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Joseph Scandura May 16, 2009 at 7:12 pm

I think it’s a great idea to get kids educated about money as soon as possible. They need to understand that money doesn’t come from mommy and daddy’s magical wallets, and you have to work to earn money.

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Money Funk May 17, 2009 at 5:14 pm

Such a great post! And just what I needed, because I just posted asking how to get the kids involved and then I found this informative post! Kissmet. Thank you.

And Andrea Daly, I like how you were able to talk to you son without him feeling burdened by the household bills.

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FredJouldd May 28, 2009 at 3:02 pm

Thanks, good article.

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Jerry May 29, 2009 at 4:50 am

It’s vital for kids to learn this, and let’s be honest, they aren’t going to hear about it at school or from their friends. I didn’t even understand car insurance when I was starting graduate school! (Thought it was like a warranty… WRONG!) Kids can understand a lot more than we give them credit for, and I think that making a “family home evening” (as mentioned above) in which you regularly lead into discussions about money can only reap great rewards for your kids.
Jerry

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Peter June 12, 2009 at 11:51 am

I just want to point out that shoving another teaching burden on the schools won’t make a real impact. Kids learn about good nutrition, effects and dangers of drugs, how our government works, basic math (to include compound interest if my kids text books are anything to go by), etc., yet significant portions of the population are obese, have drug addictions, don’t bother to vote, and can’t seem to understand even the basic math associated with money management. It isn’t about what’s being taught, it’s about how they live, and that’s where the parents play the key role in showing them how to handle their money.

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Patrick January 12, 2010 at 3:38 pm

“10% invest / 10% save / 10% charity / 70% spend”

I like how you’ve pointed out that investing is not the same as saving. I think the distinction is lost on many people.

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