Teaching your kids to be smart with their money sets them up for a happier, healthier relationship with their finances as an adult.
It's never too early to start talking to your children about money. Young kids can grasp basic financial concepts, such as understanding that one hour of work equals some amount of money, and that money gets traded for toys or food.
Children watch what you do, and they learn by example. Without getting into too much detail, show them how you handle your money so they can see the way it should be done. When you plan the family vacation, share with them how you're deciding where to go based on what you can afford. When it's time to go school clothes shopping, explain how you can buy them one just really expensive pair of sneakers or the cheaper pair plus other stuff like that cool new backpack.
We live in a world where we expect things can make us happy. Help your kids understand that experiences -- seeing the world, exploring and learning, spending time with loved ones -- are so much more important than any stuff could be. Nurture their creativity. Feed their curiosity. Make their lives rich with experience, and they'll learn to be content no matter how much money they have.
You don't need to break the bank to have a good time. Help your kids understand that a frugal life doesn't have to be a boring life by choosing entertainment options that are high in fun but low in cost. It costs nothing to walk through a local park and plan a nature treasure hunt. It costs nothing to give your kids a trunk full of your old clothes and makeup and let them play dress-up. It costs nothing to set up a tent in the backyard and let them "camp out" for the night. Focus on fun that's creative, interactive, and physical. Your kids will learn you don't need to spend a ton of money to have a good time.
Making your kids work, in exchange for money, helps them understand that money "doesn't grow on trees" and that Mom and Dad aren't their personal ATM. Budgeting their allowance also teaches the importance of good stewardship of their money; when they know they've only got so many dollars for the week, they're more likely to think twice about whether that candy bar or comic book is really worth purchasing. They also learn to make tradeoffs: they can afford either the comic book or the candy bar, but not both.
When you give your kids their allowance each week, help them divide it into three jars: One for spending money, which they can use right now on anything they want, one for savings, which means putting it aside for things they'll want in the future, and one for giving to a cause of their choice, like animals, the environment, or childhood cancer. Help your children develop the habit of saving for a goal, such as a big toy, a trip to Chuck E. Cheese or a new video game. This will help them learn delayed gratification and the importance of putting money aside.
Frugality isn't about saying "no" all the time; it's about making the most of the money you've got. Help your kids understand this by turning it into a fun game. When you go grocery shopping, challenge them to find the cereal that's the least expensive. When it's time to plan their birthday party, tell them you're willing to spend so many dollars and work with them to plan a fun bash within that budget.
Kids love helping out with grownup tasks. If you're fixing the pipes under the sink, ask your child to hand you tools and explain what you're doing as you work. If you're washing the car, let them lend a hand. If you're planting a veggie garden, ask them to pull weeds or water the plants. Use these moments to teach them the value of fixing things yourself and putting in a little elbow grease. And if your child is extra-helpful, give them a bonus –- and help them put that money into the savings jar.
Reduce, reuse and recycle. We live in a throwaway society where we're always looking for the newest gadget and tossing things in the trash the instant they show a sign of wear. Teach your kids the value of making things last and reducing waste by doing things like mending clothes when they rip and turning old milk cartons and egg containers into arts and crafts.
Help your kids to understand the gimmicks and false promises advertisers use to try to entice you into buying their products. Once they understand how advertising ropes us in, they'll be less susceptible to ads and marketing.
Every kid has said, at one point or another, that they "really need" something because all their friends have it, or they saw it on TV, or any number of other reasons. Gently correct your child when they use this language and explain the difference between something you really, truly need and something you merely want. Help them to understand that money should first be spent on needs, and that you can't expect to get everything that you want.
Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 32 countries, owns seven rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for revolutionaries who understand that they can afford anything -- just not everything. Visit Afford Anything to learn how to crush limits, create wealth and live life on your own terms.