Many think of teenagers being fiscally irresponsible. Everyone wants their kids to understand the value of money, but somehow, a lot of them never get there. It makes letting them go that much more difficult. You don't have to push your child to be an entrepreneur just so they will understand how to manage money. Actually there are some simple ways to accomplish this task even if you struggle with money yourself.
Recently I discussed this topic with Asheesh Advani, CEO of Junior Achievement (JA) Worldwide, a massive global organization that educates more than 10 million young people per year. I had long thought JA was primarily focused on teaching kids about entrepreneurship. In actuality, JA has three major pillars of how they help children become productive and resilient in society. Aside from entrepreneurship, they teach career readiness and most importantly financial literacy.
Advani, a member of the Young Presidents' Organization (YPO), has extensive financial experience having built two financial services companies from startup to acquisition. The first was sold to Richard Branson as part of the Virgin Money group and the second was sold to Interactive Brokers, one of the largest brokerage companies in the world. Now, heading up the rapidly growing global organization at JA Worldwide and teaching young people fiscal responsibility in more than 100 countries, he has seen what works best. Here are his insights for getting your kids on the road to financial freedom.
1. Get them started early.
Most parents wait to involve their kids with money because they don't see the necessity. Starting at a young age removes ignorance and reduces risk of bad habits. Advani points out they can see the value of compound interest while still young. "For saving, take a trip to the local bank and open an account when your kids turn 10," advises Advani. "There's nothing like receiving an interest payment (even if it is a few cents) in your name for the first time!"
2. Let them make mistakes with their money.
While no one wants to see anyone waste money, children benefit from learning the consequences poor financial decisions. "For spending, let your kid make some mistakes by spending too much on a toy, concert ticket, or mobile app they could have got for less," says Advani. "Lessons come quickly when regret kicks in. Low-risk mistakes make for great conversation and learning that can save more costly mistakes down the line."
3. Demonstrate how money equals work, work equals money.
A lot of parents give their children seemingly everything, but then the children don't associate value to material items. Advani advises that parents need to make the connection of work with reward. "The best way for kids to realize this is to earn money for chores and for self-initiated projects," adds Advani. "Create opportunities for small projects to earn money. If everything is provided freely, nothing will be valued."
4. Make sure they appreciate what they have.
Not everyone has enough money, and some may never have more than enough to barely get by. Children who are insolated from poverty are less inclined to value the privileges they have. "Teaching empathy goes hand in hand with teaching financial literacy," asserts Advani. "Ensure your kids appreciate the plight of others so they can appreciate the value of money."
5. Have them share their wealth with others.
The value of money lies not only in your own reward, but also enabling what you can do for others. Advani says charity helps get children thinking about how they can use their money for good. But simply donating means little if the children can't see how the money helps. "For giving, set aside 10% and make it real," says Advani. "Take your kids to meet the recipients of their charitable gift, whether it is a small soup kitchen or a large non-profit with local presence. Even if they give a small amount of money, seeing its impact will drive the point home."
6. Set the best example you can.
Children are sponges when it comes to learning--they soak everything in, including what they observe from their own parents' behaviors. So if they see you frequently blowing money at the mall or burning through your savings account, don't be surprised to see them get involved with similar habits as they get older. "If your kids see you waste money or treat savings frivolously, they will pick up your habits," notes Advani.
Each week Kevin explores exclusive stories inside the Young Presidents' Organization (YPO), the world's premiere peer-to-peer organization for chief executives, eligible at age 45 or younger.