Despite growing conversation on the importance of financial education, financial literacy scores among today's youth still have a long way to go. But as educators grapple with which programs work best, one way to lay a good foundation for your children is by setting a good financial example in the home.
After all, while there are some important things about personal finance that can be taught in the classroom, a semester or two of instruction may not override the habits kids pick up through years of everyday life. Because your children are likely to note the way you handle money, it's important to consider whether the example you set reinforces good or bad habits.
Here are seven ways you can be a positive financial role model for your children:
- Appear in control of your financial situation. You don't want your financial decisions to appear haphazard, nor do you want to appear overwhelmed. Avoid situations where you are constantly responding to bills and deadlines at the last minute. Getting ahead of your obligations allows you to address them at a more measured pace.
- Regularly refer to a budget. Don't make it look as though you buy things impulsively -- especially not big-ticket items. Have a household budget, and refer to it when approaching a possible purchase so your kids can see how your financial decisions fit into the context of a budget.
- Defer gratification. Don't make it appear to your kids that every new desire can be met immediately. Show the discipline to wait while you save up for something, as well as how anticipation can increase your appreciation of a new purchase.
- Articulate your long-term goals. Things like a new car or a big-screen TV are very visible to kids, but you need to make an effort to make sure they are aware that you are saving for less-obvious financial goals, such as their college education or your retirement.
- Don't obsess over money. Show that you take your financial responsibilities seriously, but don't dwell on them to a degree that your kids view those responsibilities in an overly negative light.
- Scrutinize your financial institutions. As kids get older, show them how you review the returns and fees of your financial advisers. Explain how to find a free checking account, and walk them through your process for comparing CD, savings or money market rates.
- Be a discriminating consumer. Beyond shopping for savings accounts and other financial services, you can demonstrate the benefits of active consumerism with each purchase you make by comparing prices and seeking discounts. Show your kids how easy it is to do this, and the rewards a little effort can bring.
Online shopping and mobile payment systems are designed to make it easier for consumers to part with their money, to an extent that spending seems almost casual. To instill a less casual attitude toward money in your kids, it is important that you help them see the careful thought process that underlies your financial decisions.
As a side benefit, the more conscious you are about setting a good example for your kids, the more diligent you may become about your financial practices.