By Claudia Mollerup-Madsen
This July 28 is National Parents’ Day. It’s a day to commemorate what it means to be a parent, celebrate the teamwork between parents and their children, and support parents’ role in building a strong and stable society. The day was established in 1994 and is celebrated each year on the fourth Sunday in July.
As parents, we have many roles and responsibilities in helping to raise up our children to be independent, responsible, and productive members of society. We teach them to wake up on time each day for school or work. We demonstrate good manners and proper behavior. We instruct them to cook, drive cars, and volunteer within the community. As a part of raising our children, we need to ensure they understand finances and budgeting as well.
Children as young as three years old can understand basic monetary concepts, and by seven years old, spending habits are already being set. Being a parent gives you the opportunity to demonstrate for your children the importance of financial restraint and foresight.
To teach financial responsibility, set up jars or Ziplock bags when your children are young; label them in groups such as savings, charity donations, taxes, spending, college, and so on. You can choose the specific categories that work for your family. Each week, pay them a “salary” for the chores they have completed. This action will set the tone for future paychecks and show them what their pay will go towards for in the years to come, in addition to teaching them that money does not only go towards fun spending.
Modeling a budget for your family can also help teach your children to ensure they budget their money responsibly. Work on a family budget together and allow your children to see the process. Then work on a budget with them and how they would like to save for something special. This can help demonstrate that different financial responsibilities have different priority levels. Whether they are in elementary school or high school, the process and lesson are similar. By high school, they may be saving for something much more expensive, making the lesson even more significant and impactful.
Additionally, demonstrate that using credit is not always the smartest way to spend money and pay bills. While much of our financial lives are lived online these days, using credit cards to order clothes, supplies, and food, it is critical to teach that money is finite. A famous MIT study showed that people spend twice as much money for the same item with a credit card as they would by using cash. When I was young, I would watch my parents pay bills by writing checks and mailing them the old-fashioned way. Today, many bills are paid online. You can still demonstrate to your children a mindful approach to paying bills and budgeting by having them sit with you while you pay bills online.
Take the time this National Parents’ Day to recognize the importance of teaching your children financial responsibility and celebrate the victories of raising them to be financially successful adults.
Claudia Mollerup-Madsen is Vice President and Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.