1. It’s never too early to start learning about money.  Even a preschooler can be told there is such a thing as a job.  I remember explaining to my young son about how Mommy and Daddy needed to go to their jobs, because we earned money to pay for food, clothes and toys for him. 

2. Ben Franklin once said, "a penny saved is a penny earned." Start a savings habit early. A good old-fashioned piggy bank is a fun teaching tool.  Give your child a goal – a special toy or treat to save up for, and help him or her track the savings.

3.  Teach them how to curb spending.  Take your kids grocery shopping and show them how you compare prices and use coupons.  Bring a calculator so they can keep a running total and see if their numbers are accurate when you reach the cashier. 

4.  Tie allowances to chores, so your kids earn their money and get an understanding of the rewards of work.

5.  Have family meetings to talk about family finances (e.g., paying for the house, food, gas, vacations, etc.).

6.  There’s no such thing as a free lunch.  Kids may not realize that pizza delivery and restaurant meals cost your hard earned cash.  Point to the prices on the menu, show them the bill at the end of the meal, and explain how tips and taxes are added to it.  They may be amazed at how much it costs to eat meals out.

7. Turn a bank trip into a learning experience.  Teach the kids that money doesn’t just magically spit out of ATM’s for free, it comes from your paycheck and goes into the bank before it comes out of the machine.  Inside a bank, explain what they do; show your safe deposit box too, if you have one.

8.  By the time a kid is in high school, he or she should have, and know how to use, a savings account and be taught how to use checking accounts and ATM’s.

9.  Ben Franklin also said there is nothing certain in life except death and taxes.  When they’re teens, show your kids how to fill out a simple tax return such as the IRS EZ form.

10.  Knowledge isn’t cheap, if you want college credit for it.  Kids need to prepare for the cost of college; go on www.collegeboard.com or other sites with your kids to research and plan for the costs of the colleges they may want to attend.

Photo courtesy of Flickr

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10 Things Parents Should Teach Their Kids About Money

Cheap people drive all the way across town to save 50 cents on soda or 5 cents on a gallon of gasoline.  They also might spend 10 hours of online research to save $20 on a airline ticket (Dammit, I have to admit I have been guilty of this one).  Cheap people also might not want to contribute money for group or work activity or make a big deal when they do pay for things.

While I am all for saving money, I think you should always consider the hidden costs of saving money.

Why Do You Save Money?

So why do you save money?  You always want to begin with the end in mind.  A lot of people save money just to save money, in other words they might save $10 at the grocery store but blow $1000 on a new LCD television or some other liability.  Another example is some people might skimp on a gift for someone they care about and during that same week they spend $20 getting their Starbucks fix.

Finding your "reason" does require some thought.  I’m sure there are many parents out there that could be putting the money that they save towards their child’s education instead of more toys or video games. 

Why Be Rich if You’re Still Cheap

Many people have the idea that being cheap is an great way to get rich or accumulate a lot of money.  The problem with becoming rich by being cheap is that you are still cheap. Think about it, why be rich if your going to behave like a cheap person.  Many people think when they have more money then I’ll stop being cheap. The problem is tomorrow almost never comes.

"I think those type of  "cheap” rich people give rich people a bad reputation."

Personally, the reason why I choose to be smart with my money is to be generous or to give it back.  Don’t get me wrong I enjoy my liabilities and toys but ultimately I do it so that I can be generous to the people and causes I care about.

Look at Value not Price

To go one step further I think it is important to look at the value of things not just price.  For example, the price of staying at a nicer hotel for your family vacation may be more expensive, but the value is very high because your family gets to enjoy the superior  amenities, location and excellent service. 

If you had chosen the cheaper hotel you would not get a good location, you may have a higher chance of dealing with bad service (potential stress) and your family might not enjoy their hotel stay.  So you could get the cheaper hotel and save money but in terms of value the nicer hotel is a much better deal.

The 80/20 Rule

 
"Buy what you love not what you like" – Louis Vuitton Shoe Photo Credit

I remember reading this article that said most people’s wardrobes follow the 80/20 rule, meaning people only wear about 20% or less of their clothes on a daily basis.  I have to admit that this is true for myself.  In my closet is a bunch of clothes I haven’t used in years.

By taking this rule into consideration, why not buy nice clothes that you will use often.  Many people skimp on clothes because it might be expensive, but buy two pairs of cheap clothes that they don’t end up wearing.  Again, you want to look at value not price.  If you spend a hundred dollars on a really nice dress shirt or blouse that you really love and will therefore wear often, then you will get your money’s worth.

"Follow the 80/20 rule.  When it comes to clothes, don’t look at price, buy only what you love not like."

Stop Being Cheap to Yourself

As you can see being cheap really means cheating yourself.  Again, it is nice to save money but always consider the hidden costs.  Can you put values on relations with friends and family, your integrity, time and happiness?  Also, don’t forget to look at the value of things not the price.  Just something to think as the cheapest price is not always the best choice.

Photo Credit

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The Hidden Cost of Being Cheap