by Sam Renick

Created on: December 15, 2010   Last Updated: December 27, 2010

Here are three steps anyone can take to teach their young children to be money smart and develop empowering financial habits.

Step one: Use stories and songs to start the process early!

This is something that can begin in the womb and will lay a foundation for later learning. Why start early? Children are bombarded from birth with a tsunami of spending and purchasing messages that in many cases bury them in debt before they are twenty. It is better for you to take control of the messaging than allow advertisers to do it. Bad habits once established are near impossible to reverse. An additional benefit of beginning at birth is it affords parents time to think about and start practicing their own money values. Stories and songs are an entertaining an engaging strategy to get the ball rolling that have the added benefit of building literacy skills.

Step two: concentrate on establishing a mindset!

Before you teach kids to count and identify coins, begin to cultivate a mindset children can use to process financial decisions. Smart money management and habits are about choice making. Initially focus on goal setting, planning, learning to ask questions and be inquisitive, making lists, and making a habit of saving money. Later, talk about earning and smart spending. It has been my experience that having goals often leads to more purposeful spending.

Where should you begin and how should you do it? First, get yourself up to speed on personal finance. Read books, magazines, and articles on the subject. When it comes specifically to kids and money, read anything written by Janet Bodnar. She is an authority. Clarify your own thinking. Write down your money values. Continue to share stories and songs with kids. For example, Tops and Bottoms is a fabulous story on industry and planning. The song Get in the Habit is a toe tapper on saving money. Create sayings and slogans like “saving is a great habit,” “earning money is fun to do,” and “money likes to grow and grow, saving and investing make it so,” to reinforce the foundation. Post the slogans everywhere. When your children are ready include other activities like saving and decorating money jars, coloring, activity books, journaling, visiting banks and credit unions, playing games and video games. Take full advantage of regular day to day activities like shopping to practice and cultivate your kid’s money skills, particularly making lists. Making lists will help them learn to organize and prioritize. Have them separate and divide their money into jars. Give the jars names aligned with their purpose. Allowance is okay if you are able to consistently administer it. Personally, I like placing an emphasis on earning money. So, I would give kids a list of extra jobs they can choose to do to make their own money that are above and beyond what they should reasonably do as members of the family

Step three: walk the talk!

Live, model and speak your money values as consistently as you can. Surround yourself with people whose values you share or aspire to. Join groups, clubs, and associations with values similar to your own. Have your kids do the same. The boy and girl scouts are both outstanding organizations. They both place an emphasis on work, frugality, and independence. A child’s mind and eyes are like sponges. From the moment they awake they are soaking in and soaking up information.

Finally, remember, learning is a life long process. Mastery takes practice, time and repetition.

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