Whether your net-worth is substantial or modest, educating your children about money is one of the most important things that you can do to safeguard their future.   You work hard to communicate your values relative to your ethics and integrity and similarly, proactive money management is something that has to be taught.   Most typically, our school systems’ focus is woefully inadequate in teaching the basics of budgeting, money management and Wall Street 101. Consequently, the education of children regarding proactive financial responsibility falls squarely on the shoulders of their parents.

So where do you begin and what will work effectively to instill your values towards money and wealth with your children?

First and foremost, it is never too early to begin.  Setting clear financial limits and saving goals is a good start, especially given the current cultural norm of “bigger, better, more” and the “I must have it now” spending mind-set of most consumers. You will have to decide what is right and how much spending is too much, but explaining to your kids the rationale behind your decisions begins the thought process. Setting limits and letting them “earn” the right to acquire gets them thinking along the lines of why one needs to plan and save, how much things cost, how badly they want something, etc.

The next step is setting up a budget for your children. Whether you give your children an allowance outright or pay them for completing chores is totally up to you. But by letting them get a sense of how much something costs, keeping within their budget and helping them to choose between items if they must, helps them to puts a value on the purchase and a value on saving money for such purchases.

As they begin to work within a budget and with numbers as it relates to things that they want to acquire, not only does it begin to instill the value of saving, but it also hones the math skills that they are learning in school.  

Other exercises you can do to help sharpen their skills can happen at the grocery store or on shopping trips.  It is fun to challenge your children to add up the total in their head when buying a few items and then watch as the register is rung.  If you have a list and know approximately what you are going to spend, you also can have your children add up the items as they go into the cart and make it a game to see who comes closest to the final total.

A philosophical education about money and wealth is just as important as their quantitive skills training.  For instance, educating your children about the poverty in the world and how people less fortunate live life can help to put money and wealth in perspective.  This can lead to interesting and thought-provoking discussions with them about why money is important, but how other things in life are important as well.  You can also encourage your children to get involved in school projects which are aimed at helping those in the community who are less fortunate financially.  Discussions and taking direct action like this helps them to think larger than their own world, see that they can make a difference and that they are doing their part to help.

If you are fortunate enough to have a sizeable net-worth, introducing the children to the family advisor is another great idea. The advisor becomes the objective third party and can explain things in a different manner when questions arise.

In summary, it is all too often that families of all types of net-worth fail to address these issues with their children and educate them about proactive, financial responsibility.  The children can end up in debt or spending wildly - often running through sizeable inheritances. Starting the financial education of your children early increases your chances of imparting your value system and allowing you to transfer your family wealth to your children with confidence.