Do you want to prevent your child from being among the many young adults who leave post-secondary education up to their eyeballs in credit card debt? Help them learn the skills they need to manage their money before they leave your home. By the time they are off to university or college, it may be too late.
Teach where money comes from
Money comes from work, not other people, the government, or dumb luck. – Dave Ramsey
It both amazes and perplexes me when people expect others to bail them out. Don’t get me wrong – I absolutely value our Canadian social safety net and am happy to support the less fortunate through my tax dollars and charitable contributions. I’m also more than willing to pitch in with my own labour when needed. That’s not what I’m talking about. What frustrates me is the mentality of expecting not to have to pay back debt. Or expecting opportunity to fall from the sky instead of going out and creating it. Yes, there are corporate bailouts and our system is messed up. Our kids need to know that life is not fair. They also need to know that relying on our messed up system is not a good life plan. Regardless of whether debt is the result of bad choices or being dealt terrible circumstances, work is going to be what pays it back.
If we teach our children that money comes from work, that lesson will serve them well for their entire lives.
Thinking outside the box – the entrepreneurship mentality
If we want our children to create their own opportunities, they need to learn to think outside the box. Having initiative to solve problems in new ways is becoming increasingly rare in today’s job market. During my hiring days, whenever my partners and I came across a candidate with an entrepreneurship mentality, we made sure to get them on our team as quickly as possible before another firm scooped them up.
One way that your tween or teen can learn to think like an entrepreneur is by being an entrepreneur on a small scale. Running a part-time business while in school is a great way to earn extra cash while learning money management skills on a deeper level. Your child may want to test out a future career by running a part-time business or they may do something completely different. Regardless of which field the part-time business is in, it will look great on their résumé.
Start commercial… I have an e-course being released on April 12th called The Emerging Entrepreneur: Launching your part-time business in Canada (Student Edition). This 8-module package will teach your young adult, teen, or tween everything they need to know to launch and run a part-time business in Canada. Next week, I will be giving away a copy to a blog reader, so stay tuned for that! Those who opt to receive the blog by e-mail before the course release date will also receive a coupon for 10% off the course price. You can subscribe at the top of the right sidebar of this page or here (your coupon will be delivered by e-mail Thursday the 11th). Ok, end of commercial!
Start transitioning expense management
In conjunction with teaching where money comes from and thinking like an entrepreneur, transitioning expense management can help your child learn to manage money while still in the safety of your home. Instead of paying for all your child’s expenses as they come up, gradually transition to having them make those decisions themselves. For example, if you usually give your child money each Friday night when they want to go to a movie, change the framework and give them $x at the beginning of the month and tell them that’s their movie budget until next month. If they spend it all on popcorn and goodies the first week, they won’t be able to go to a movie for the rest of the month. The most important part of this plan is to stick with it. If you give them more money on the 15th because they have none left, not only have you destroyed the entire point, but you’ve just taught them that money really does grow on trees.
If your child is already responsible for their social budget, then choose something else to transfer over. Many families start with clothing, but whatever makes sense for your family is fine. The only things that would not be appropriate are expenses that you see as mandatory. For example, if you just couldn’t live with it if your child took the money from their violin lessons and spent it on chocolate, don’t transition payment for violin lessons until they are able to grasp the concept of short term sacrifice for long term gain. Pay for the violin lessons yourself and keep that out of what they are responsible for.
Next week, we’ll talk about some fun stuff that is educational at the same time.
What do you do to help your older child learn about money?