Too many young adults go off to college with no experience in balancing a budget or managing a checkbook—and it costs them. So it’s up to you to teach them. Start with delayed gratification. It teaches them to be less impulsive and more thoughtful about what they want.
An allowance is an excellent way to instill lessons about money. Having their own money lets kids learn the value of things, the need to budget, the value of savings, and the principles of tithing. If your child wants you to buy a new Lego set when he/she is in the toy store, that’s a good time to say, “I’m not willing to buy that for you, but if you really want it you can use your own money.”
First off, the sticker price alone will be a jolt of reality for them. And if they really want it and don’t have the cash, they will have to delay gratification, earn extra money, and consciously save their allowance. The ball is in their court, and if they end up saving for it and buying it two months later, they will really appreciate it and take extra-good care of it.
Help them open a savings account to understand interest. Also, if you don’t have much expertise in financial planning, find someone who can help them do a little investing in the stock market for some real-life, hands-on experience with using money to earn money.
On a more metaphysical level, they need to understand the principle of abundance. When I asked my parents to buy me things growing up, the mantra I heard was: “Who do you think we are, Nelson Rockefeller? Do you think money grows on trees?” So what I developed from that negative talk was a ‘scarcity mentality’ that told me there would never be enough and that life was hard. It took me a lot of work to undo that attitude as an adult. I want kids to grow up believing that if they work hard they can achieve what they want, and that there is actually ‘more than enough.’ People who don’t have fears and negativity around money are more relaxed, optimistic and make better decisions about it.
But it’s also important to understand that having more ‘things’ does not bring more happiness. Research has demonstrated that once above the poverty line, more money has no significant effect on happiness or fulfillment. Having money can mean having more options and opportunities. It can provide another way to be of service to others through acts of philanthropy. But I don’t want kids to grow up making wealth the driving force behind their decisions about career and life. People with this motivation end up with more mental health problems, poorer relationships, and lower levels of happiness and fulfillment.
And of course, model what you want your kids to emulate by the way you yourself handle money. Wealth and abundance should be appreciated, but first they need to be taught.
By Dr. Tim Jordan
Tim Jordan, M.D. is a Behavioral Pediatrician who specializes in counseling girls ages 6 through college. For more information, go to drtimjordan.com.
