Providing opportunities for children to practice self-control and to learn about saving will help them mature into adults who understand the value of money.
We all know that money doesn’t grow on trees, but do your children really know how to manage it? Making the connection between saving first and spending later makes possible a lifetime of responsible money management. You can emphasize this connection by following a plan of age-appropriate techniques designed to emphasize the importance of controlling impulsive behavior.
Why Starting Early Is Important
1. Before teaching children about money, it is important to help youngsters control their impulses, potentially as early as age three. According to a study presented to the National Academy of Sciences in January 2011, a child’s self-control, as evidenced by traits such as conscientiousness and persistence in striving for goals, are strong predictors of success, including wealth, later in life. Children who scored lower on self-control were more likely to experience problems with saving, home ownership, credit and money management.
2. Depending on the age of your children, consider whether the following suggestions are compatible with your views about children, self-control and money.
Ages 2 to 8
1. Buy a piggybank where your children can deposit money that they earn from chores or receive as gifts. A visual chart showing how much they save over time can be a motivator to save more.
2. Provide an incentive to reach a savings goal. For example, when your children save $25, consider adding a few more dollars or letting them buy a treat under your supervision.
3. Make children wait until after meals to eat treats or until an occasion such as a birthday to receive a special toy. The practice of delayed gratification can help build self-control at home, according to Mary Alvord, a clinical psychologist and author of Resilience Builder Program for Children and Adolescents.
Ages 9 to 12
1. Consider whether you want to start an allowance. Tying an allowance to chores is a matter of debate, with some parents believing that children should not be paid for helping around the house. An allowance is a family decision that reflects your values about money.
2. If you pay an allowance, require your children to put a portion of it into a savings account and use the remainder for personal items, gifts and entertainment.
Ages 13 to 18
1. Even if your family has means, consider letting your teenaged child have a part-time or summer job to earn their own money. Require them to set aside a portion of their earnings for personal or college expenses.
2. Establish clear rules for curfews and completion of homework before screen time. These practices will help older children control themselves without your intervention, according to Ms. Alvord.
3. In a few years, your teenager will be approached by credit card companies looking for college-age customers. Now is the time to review the importance of paying a balance in full every month and reserving credit for items of value.
Ages 19 and Older
1. If your family pays tuition and other college costs, require your college student to pay at least a portion of personal expenses.
2. If your adult child cannot find work and ends up living with you, resist the temptation to start paying your adult child’s bills or student loan debt.
Let me work with you to identify opportunities to reinforce the connection between saving and responsible spending. Because starting early and presenting a consistent message will enable your children to develop sound habits that last a lifetime.
Nicole Dickerson is a Financial Advisor and Chartered Retirement Planning Counselor at Morgan Stanley in Beverly Hills. She specializes in working with individuals, families, as well as corporations. Her featured services include professional portfolio management, education savings, 401(k) and retirement planning, estate planning, insurance, and business lending.