How to go beyond teaching your child and teen the basics of money education, and instead focus on teaching them to be financially resourceful.
Let me ask you this: the last sticky, complicated money situation you dealt with – like calculating a future budget to see if one of you can be a stay-at-home parent, or deciding between the health insurance plan with a higher premium and lower co-pays and the one with a lower premium but higher co-pays – were you able to fill in a bubble (a, b, c, or d) to solve it?
Did you draw on those skills you learned from those coin identification worksheets in 2nd grade to help you come to the best long-term financial decision (that also took care of the short-term problem)?
Didn’t think so.
For the sticky money situations I’ve faced in my own life, I couldn’t just pick A, B, C, or D. I had to fill in the blanks. Fortunately, I have loads of experience doing so, so I could work through things like:
- A simultaneous income decrease and cost-of-living increase
- Calculating the most cost-effective health insurance plan after getting married
- Figuring out the best way to deal with my parcel of student loans after graduating
But your kid? Not so much.
Yet that’s what most kids are asked to do. To take their basic money education – counting coins, making a store transaction, filling in a teen budget template once, etc. – and see what they can do when thrown into the deep end of life.
This is real life, folks.
The basics of a money education are building blocks, for sure. But we need to go beyond them.
We need to teach our children to be financially resourceful.
What does Financial Resourcefulness Look Like?
Let’s teach our kids to be financially resourceful, so that when the money problems hit the fan, they’ll be able to work through it as a money problem-solver.
Before we dive into how to teach your child to be financially resourceful, it’d be helpful to know what financial resourcefulness looks like.
Financially resourceful people:
- Know How to Optimize their Resources: They look to all of the resources at their disposal – not just income – to solve money problems.
- Can Think through Plan B, C, and D: Getting to Plan A can be a lot for some people. But financially resourceful people? They don’t quit after Plan A doesn’t work out. They naturally work on scenario planning, where they work out how to get what they want or need in a different way than how they initially thought they’d accomplish it. There’s no single point of failure, here.
- Are Juggling Pros, But Take Steps for a Juggle-Free Future: Financially resourceful people are often pros at juggling their money – between accounts, between budget categories, between paychecks, etc. However, they take steps to ensure that their future is going to involve less juggling. And because they slowly work their way there? One day it actually will.
- Have a Solid Foundation to Build More Complex Learning from: They understand the money basics enough that they can dive (or tip-toe) into more complex money topics and learn about them.
How to Teach Kids to be Financially Resourceful
Those skills I discussed above? They don’t just happen overnight. It takes practice. And there’s no better time to start helping your teen and kids practice their financial resourcefulness than right now.
Let me show you how.
1. Start Seeing their Money Problems as Opportunities
The next time your child is up against a money problem – doesn’t have enough at a cash register to pay for something, loses their money in their room, wants to buy something exorbitantly expensive, etc. – don’t come to their rescue.
Reframe your thinking, and use this as an opportunity to take them through one of the exercises below.
2. Stop Shielding them from Natural Money Consequences
I’m a mother. I want to swoop in and save my little guy from all of life’s catastrophes, just like you.
But I know that it’s not healthy for him for me to do that – at least not for the stuff where a real lesson can be learned.
If I just let him sit through some of the discomfort from the decisions he’s made, then I know I’m setting him up to learn how to keep moving in the discomfort, and to find some sort of resolution.
Here are a few natural money consequences your child might experience after over-spending:
- Can’t buy what they want
- Can’t buy what they need
- Will have to wait until their next allowance/chore commissions/paycheck
- Can’t go out with friends
- Have to ride the bus (because they can’t afford gas)
- Have to substitute something free/they already have for what they had wanted to buy
These consequences can seem harsh…but they’re a lot better than the type of consequences they’d face as an adult (such as getting their lights turned off, missing their mortgage payment, etc.).
3. Take them through this Exercise
Part of being financially resourceful is learning how to use all kinds of resources – not just money – to solve money problems.
The next time your child or teen wants something that they cannot afford at the moment, take them through these four questions:
- How can I get it cheaper?
- What else can I substitute to still satisfy the need/want?
- If I wanted to save up for it, how long would it take? Is that time, energy, and income commitment worth it to me? (here’s how to save money for a child, and how to save money as a teen with or without a job)
- Can you think of another way (I’ve been using this magical question with my child since he’s been about 2.5, and it has always calmed him down from the upset, and let him instead start to focus on alternatives)?
4. Help them Work through the “How”
Many kids know the “what” and they know the “why” of what they want.
But they might not know the “how”.
Instead of buying it for them at Christmas or on their birthday, help them work through how to get it themselves. With a real plan. And then help guide them through it.
Helping your child through a savings goal is, in my opinion, one of the best ways to anchor their entire money education. It gives you context to discuss money with them, and they can relate better (and have more motivation to listen) to the lessons you’re trying to instill because they want to get what they want. They’ve got skin in the game.
Here are some resources to help:
- Goal Setting for Kids
- How to Save Up for an iPhone as a Kid
- 100 Goals for a Teenager
- 26 Short-Term Financial Goals for High School Students
- 15 Intermediate Financial Goals for High School Students
- 11 Long-Term Financial Goals for High School Students
5. Give them Money Problems to Solve
One way that you can involve your kids in the household finances without revealing your income, or too much information you might be uncomfortable with, will also help them learn how to solve money problems.
It’s by giving them scenarios to work out together with you.
For example, you can give your kids the decision of deciding between a more expensive weekend getaway where you’ll only be able to afford a few activities, or a less expensive weekend getaway where you’ll be able to afford more activities.
You could have your kids help you price a renovation project in your home. Or budget for gifts to family and friends for the holidays.
You could tell your kids that if they help bring electricity costs down by $10 each month (by conserving where possible), then you all get to go to Chuck E. Cheese’s over Spring Break.
There are lots of money scenarios you can bring your kids in on, so that they can get their feet wet making decisions and working through an issue with a limited resource.
No matter how much money your child has when they leave your nest, and no matter what kind of money they make, they will face money problems. Stuff happens. That’s why it’s critical that we look beyond the basic money education, and instead set our eyes on the goal of raising and launching financially resourceful kids into young adulthood. Not only that, but that we stop solving our kid’s money problems for them and instead, teach them to become money problem-solvers.
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