Have you ever thought about the role discipline plays when teaching kids about money? I know we apply discipline to losing weight, learning a new skill or getting an education but the same is true when it comes to money, specifically what you do with it after you have earned it.
We live in a society that encourages spending beyond our ability and it is very easy to fall into this trap. In our recent economic downturn we have seen that those who were reckless in their financial habits have had a much more difficult time than those who were fiscally responsible. Understanding the importance of discipline and teaching your kids this can go a long way in creating a healthy financial future for your children.
When it comes to money and financial planning, the two things most people fail at is creating a plan and sticking to that plan. There is an old expression that says “to fail to plan is to plan to fail.” If you ask most people what is their plan as it relates to their money once they get past paying the bills, they usually have no idea. Having money in a savings account or planning for their future is often lost in the need to get the immediate gratification of having it now. Back in the old days if you didn’t have the cash to pay for it you would wait until you had saved enough money to pay for what you wanted. This forced you to live within your financial means. On the flip side of the coin some people feel like they just have too many bills to save any money and this is equally as devastating. The question then is, when teaching kids about money how can you model good behavior so they can avoid this trap?
You must first look at your habits. Do you have a plan? Are you spending everything you make? Are you planning for your future or only thinking about paying bills now? When it comes to saving money one of the simplest ways to do that is by tapping into your company’s 401(k) retirement plan. This money comes out automatically before taxes so you are forced into saving money. Also because it is pretax you generally won’t notice much difference in take home pay. A second simple strategy may be to set up an automatic savings account. You can have money deducted every week and put into an account. The key again here is automatic. Since most people won’t do it themselves, if it’s done automatically you ensure it gets done.
Your goal when teaching kids about money should be getting them to understand all of the wonderful ways proper use of money can help them both now and in their future. Most people’s ideas about money are shaped by what they see in the home. If you don’t like how you treat money change it because your kids will probably end up treating it the same way.
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