Why you should let your child make money mistakes
Hali Brown London is a CERTIFIED FINANCIAL PLANNER™ (CFP®) Professional. She is also a Mom to three children and will share what she’s learned about teaching children about money and finances from time to time. We hope you find her tips and insights useful.
As a parent, I try to shield my children from risks. When they make mistakes, I try to help them learn from them. (On the other hand, they like to point out what they perceive as my mistakes with great joy. But that’s another story.)
I’m sure you try to do the same: protect them from risks and help them learn.
When it comes to learning how to manage money, you should do the exact opposite.
Remember when your mother told you not to touch something that was hot? And you did it anyway? (I know I’m not the only one.)
Did you learn your lesson? Yes. Did you do it again? No. My children did the same thing, and I bet yours did, too. (Maybe it’s genetic!)
So give your kids control over their spending, and expect them to make mistakes. They’ll buy a toy, a game, or something else they’ve seen advertised, and then be disappointed. They’ll buy things that sit and collect dust. They’ll buy things that break right away. And boy, will you want to say something to them. Something that sounds a lot like, “I told you so.”
Please don’t. When they come to you, use that conversation to help them figure things out for themselves. Ask questions. “When you saw the ad, what did you think?” “What did you think the truck would do?”
Let them realize the gap between expectations and reality.
There’s another step to this, too. Be open about your own financial mistakes. Especially when your children are younger and see you as infallible—ours are way past that stage!—telling them that you’ve also made mistakes and learned from those mistakes is a powerful lesson.
It tells your children (or child) that everyone makes mistakes, and that’s okay.
What about charity?
If you want to encourage charity, I recommend not just saying, “Set aside 10% of your money to give to X.”
Instead, live it. In our house, we’ve all volunteered at various charitable events; we’ve all done things to help others. By doing that, our children learned about the importance of helping others because it’s the right thing to do. They’ve made different choices about charitable giving, and that’s okay. They’ve learned the lesson about the importance of giving back, and I hope and believe they’ll carry those lessons with them for a lifetime.
Having said all that, as they enter the working world and begin saving and investing, I won’t be as hands-off when it comes to financial planning and making investment saving choices. I don’t want them to learn about investing by making mistakes because those mistakes are much bigger than a toy that gathers dust.
Yes, I’m a mom. But I’m a CERTIFIED FINANCIAL PLANNER™, too.
Here’s to raising kids who are savvy about money!
Want more from Hali on how to raise financially responsible children? Register for this Friday’s lunch and learn! Register now!