The lessons I have learned about parenting emerge from a pile of failures. Teaching financial concepts is no different! Yet, they are not truly failures if we learn from them.
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1. We failed to make our daughters save more.
Since our daughters were young, we taught them to give 10%, save 10%, and spend 80% of their money. They both have generous hearts for giving regularly and giving extra when they see a need. But, now saving for a first car is extremely hard because they have not flexed their savings muscles enough.
Because we are able, we use matching funds to encourage saving more. However, I highly recommend putting a limit on your match, especially if you have a hard worker or creative child. And, especially if it is for a large purchase like a vehicle!
If I started over, I would change our percentages to Give 10%, Save 20-30%, and spend 60-70%. After all, we save 15% of our income in retirement alone. Then, we save additional money in sinking funds for future expenses. We learned these concepts from Dave Ramsey’s *Total Money Makeover.
2. We said, “We can’t afford it.”
In elementary school, we said “we can’t afford it” so often that our daughters thought we were living in poverty.
The truth is, we could afford most of the little toys that they wanted, but they were not a priority. Nor had we budgeted for the desired expense.
So, we changed our responses:
- “Our priorities are _____. If you still want it, how will you work for it?”
- “We did not budget for that. Remind me to make it a line item in our next budget.”
This method taught our girls work ethic and delayed gratification.
3. We failed to progressively give them budgeting skills.
We tried to take our daughters from the Give, Save, and Spend jars in elementary school to a detailed written budget form in middle school. There were tears. Some *may* have been mine.
We took a step back. We went from 3 jars to 3 envelopes.
Then, we divided the Spend envelope into categories that our daughters are responsible for: gifts, meals without family, extra clothing, souvenirs, entertainment without family. A jumbo paper clip keeps the money for each of these categories separate.
4. We failed to teach our daughters about income taxes.
Our oldest daughter has a truffle business. Our youngest daughter has a *Cricut® monogramming business. Now that our girls created their own businesses, they are learning to put some aside for “income tax.” Although they are willing to give and save money, they are less willing to pay taxes. It is a hard lesson to learn.
We should have set money aside for income taxes from the start of their businesses. Despite the groaning, this step is an important one for maturity and beginning to think about how they will use their votes in the future.
5. We failed to teach our daughters how interest can affect you negatively.
We diligently showed our girls how our savings accounts earn money due to interest. We showed them compound interest charts. But, we failed to show them how interest must be paid back when borrowing money.
We showed them examples of how much interest a person might pay when using credit cards, pay day lenders, and even mortgages! A $3000 couch ends up costing almost $550 extra at 18% interest on a “normal” credit card. A 15-year mortgage can save thousands of dollars over a 30-year mortgage.
6. We failed to budget for once a year purchases.
Christmas season and our summers of birthday celebrations left us stressed and strapped for cash. When we should have been enjoying ourselves, there was always a little stomach upset.
We developed a plan and shared it with our girls. If we planned to spend $150 on birthdays, we saved $12.50 per person each month for a year. We did this for Christmas and back to school shopping as well. This method taught our daughters to plan for annual purchases such as Christmas, school activities, future car insurance, etc.
7. We failed to plan for unexpected expenses that are not emergencies.
In life, especially with teenagers, there are unexpected expenses no matter how much you plan.
We save an emergency fund for emergencies. We teach our daughters to create “Sinking Funds” for things we know will need to be repaired or replaced eventually, but we don’t know when. Cell phones and car repairs fall into this category. These funds are also used to save for a future purchase such as a car or updated computer.
And, for those truly unanticipated expenses, we have a “miscellaneous” fund. This fund is not for clothing or entertainment. It is solely for expenses for which we are not prepared.
Final ThoughtsFinancial skills are taught AND caught. Click To Tweet
Financial skills are taught AND caught. However, as imperfect humans, we still make mistakes. Parents, be encouraged to admit your mistakes to your adolescents and let them watch your corrections. Not only is this a powerful learning experience, but you are acting as a powerful example to your children.
Parents, what have you learned about teaching your children money skills? Our combined thoughts may make a difference in our adolescents’ futures!
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