HiltonsOne of the most valuable lessons a parent can teach a child is to be financially competent. A child that knows how to use money intelligently and responsibly will excel well beyond his peers. A young adult that naturally values the autonomy of self-sufficiency, the powerful exponential growth of delayed gratification, and the potent influence of incentives will be capable of success.

The signs of rampant monetary illiteracy in young adults are all around us. It is often found even amongst the intelligent and the affluent. Over half of college graduates will move back in with their parents. It is common for college age adult to have destroyed their credit rating with unbridled credit card spending. Marriage is often postponed, or even not feasible due to high debt. Many marriages are severely strained and end due to monetary issues. Possibly the most tragic, most of us personally know a well meaning parent whose unfettered generosity has enabled their child to fall into a costly nightmarish life of substance abuse. In contrast, monetarily literate young adults will increase their potential success in career, marriage, influence and ambitions.

Toddlers through teens can be taught how to respond to money. Much of the fundamental lessons can be grasped in toddler years. Money can be earned, spent, saved or shared. By their late teens these ideas can be mastered as a way of life.

Earning Money: Instilling in children the lesson that work has its rewards is important. A child should expect some chores to be done out of respect for others. But incentives can motivate and encourage areas needing attention. An immediate gold star might help the youngest learn to consistently make their bed. Giving them money and a reward after reaching a goal will have many lessons. Encouraging them with money can help them work on everything from earning good grades to staying fit. Kids are happiest if they are contributing and progressing. When a child earns money, it helps them realize a parent values their contribution, and gives them an immediate measurable mark of their progress.

Don't forget to teach the ability to bargain. Help them sell unwanted items on eBay or online. With some jobs a parent may want to negotiate the price. Mowing the lawn, for example, may depend on how hot it is or who is available. Teaching a child to take advantage of supply and demand may cost the parent more, but learning the lesson to value their effort is priceless.

Spending Money: There are many ways to teach how to spend money wisely. To eliminate the give-me's on entering a grocery store, give them a dollar or two. A kid will learn with practice, that once its spent it's gone, and weigh their choices. Allow them to make mistakes. It will not take too many times before they learn the frivolity in advertising. Perhaps the most important lesson is that money has limits and parents are not a magical ATM. Rather than simply splurging on kids, let them be involved, even if its a trivial amount. A souvenir bought on vacation will have added significance if they chose it. Buying the collar for the puppy will increase their appreciation and responsibility towards the dog. Contributing to a family adventure lets them feel more valued.

As they get older, they can get more involved with fiscal planning. Have them research their spending. Take advantage of their tech savvy. Have them present which cell phone plan is best. Let them research internet plans. Get involved with vacation planning on the internet. If they have been involved researching such things as auto insurance, health clubs versus YMCA memberships; they are much better prepared to research college choices, cost and financing. Having the kids involved in planning a budget for events that a parent is paying for will help them understand a budgets importance. Learning to make a simple listing of major cost will give a young adult a huge advantage over most of his peers.

Young adults often are unconscious of the budget planning of Moms and Dads. They assume they can maintain their parents lifestyle. They often are oblivious that their fixed spending has them headed over a cliff. The reality check of budget skills can help them make informed choices. Finally, a few years before they leave home, get them a credit card with a limit. They soon will get one anyways. Credit card companies have made it very easy and tempting for college age adult to be enslaved to credit card debt. A supervised introduction to responsible credit use may prevent a lifetime of high interest and poor credit.

Saving Money: For the young, a simple and fun piggy bank can teach the important habit of savings. When they are about seven and can do simple math help them open a bank account. Going over the statements will teach about interest and simple accounting besides the practical lessons in math. When they are young setting shorter achievable goals can help encourage saving. As they get older longer goals are more appropriate. Matching parental contributions can help encourage saving, and show the value of an employer sponsored 401k account. As they get older the investment lessons should progress. Teaching them about investing mutual funds and stocks can prevent paralysis due to fear. The young should take more short term investment risk to maximize their long term gains. But many do not, because they fear the unknown. They have never been taught. Designating a part of their personal saving fund as an emergency fund has several invaluable lessons for children. The most important may be that Mom and Dad cannot always bail them out.

Yet equally important is planning for rough times. It should be decided well before the ticket or car accident, how much they will have to pay and what restrictions will be attached. These talks should be held for any new responsibility prior to losing or breaking a costly item such as glasses, retainer, or the band instrument. These times will be emotional enough without the added fear of testing the limits or feeling abandoned. Having a plan and having an emergency fund available for these times are emotionally freeing, but still teaches responsibility. Likewise openly discussing the planning and savings for other major life events can teach as well as eliminate resentment. It should be clear how much a parent will contribute to college, a wedding, or even under what conditions they can move back home. Gifts and contributions to college saving, and IRA plans should often be discussed with the child. Again lessons can be learned with discussing the statements when they are young. It is assuring to know what a parent expects especially on long term goals that involve more independence.

Sharing: Giving can be a valuable lesson to anyone, but especially to children that have so much given to them. A few big lessons are that nothing is free, that confidence and independence, comes through nurturing others and the joy of being part of something bigger than themselves. Encourage kids to be involved emotionally to their chosen charity. Helping them see the benefits of their gift. Show a child how they meet a need after a gift. Tracing the money to meeting the objective and then show how the blessing can multiply. Teach them to look for ways to expand this growth effect. Among the many great charities are some frauds. Help them research how responsible a charity is with its money. Help them to consider if a charity is nurturing others to behave responsibly towards money, hence reproducing its effectiveness. A good charity will mirror a good parent/child relationship with money. Both will use it to foster independence rather than a dependency to inflate its own worth. Teaching a child to give generously and responsibly will bring the lesson full circle, enabling him as an adult, to effectively teach money intelligence to children. Finally, a good example may be the best teacher of monetary intelligence. A parent should be a good example of monetary responsibility.





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