Teaching Children the Importance of Good Finances

-by Mimi Rothschild

In today’s economy, with the recession looming and unemployment rates on the rise, there has never been a better time to teach our children the importance of maintaining good finances. In fact, it is such an important part of every day life that I believe it should be consistently incorporated in your home school lessons. But how?

As always, we should start at the basics, our foundation, God’s Word. Proverbs 22:6 tells us to “Train up a child in the way he should go, even when he is old he will not depart from it”. As parents, we know that this scripture applies to many aspects of life. Healthy finances should be one of them.

There are generally three key components of instructing children on how to manage money.

Communication. As with most anything, opening the gates of communication and keeping your children involved is one of the most effective ways to get them to learn. You should take the time to explain the concepts of earning, saving and spending. Informed children will become informed adults, armed to face the challenges of the real world.

Application. The expression “actions speak louder than words” rings true, particularly when it comes to healthy finances. Earning an allowance, putting that money in the bank, even a piggy bank, and spending it wisely are all ways to drive home the basic concepts of money management. Practice makes perfect.

Example. A child is like a sponge. And you are their primary influence. Watching how you handle money will create a lasting impression in their minds and mold the way they handle theirs in the future. As with anything else, you must practice what you preach. If you tell your children not to spend frivolously, yet they see you regularly spending money on unnecessary things, they will quickly forget your words and inevitably mimic your actions. Be careful to always provide a good example to the little ones in your charge.

So, what types of things should you introduce to your children to help create an understanding of the concept of finances? There are many angles to approach the subject, but the most important areas include:

• Income – assign your child certain household chores through which they can earn a weekly allowance

• Budget – draw up a very simple budget to teach your child how to categorize their income, such as savings, spending and giving.

• Tithing – it’s never too early to teach your child about the importance of giving back to God. II Corinthians 9:6-7 says “(Remember) this: he who sows sparingly and grudgingly will also reap sparingly and grudgingly, and he who sows generously (that blessings may come to someone) will also reap generously and with blessings.” Tithing is a critical part of healthy finances, so make this point clear to your little ones.

• Saving – teach your child the importance of setting a certain amount of their income aside each time they are paid, and keep track so they can see their savings grow.

• Giving – explain to your child the importance of giving to others, and encourage them set aside some of their income each week to help those in need.

• Debt – the concept of borrowing, and the costs associated with it, should be introduced to children as soon as they are old enough to comprehend it. Explain the difficulty that can be involved in getting out of debt, and encourage children not to spend beyond their means, but to buy with cash whenever possible.

There has never been a more critical time to drive home the concept of good finances than now. Let older children see news stories about the economy, so they understand how very real the results of too much debt and not enough savings can be. By instilling good spending habits in your children from a very young age, you will help them to become financially independent and secure adults.

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Mimi Rothschild is the Founder of LearningByGrace.org the nation’s leading provider of online PreK-12 online Christian educational programs for homeschoolers.