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4 Guiding Money Principles that Every Child (and Adult) Must Learn

Please welcome my good friend and Certified Financial Planner (CFP®) Shannon Ryan from The Heavy Purse as she guest posts today.

word learn engraved in stoneWhen I was 13 years old, my father began giving me “money lessons” while we ate dinner, and I had no idea how these simple lessons would change my life. He didn’t focus on how money worked, but instead he showed me how my emotions affected my spending habits and money beliefs. With his guidance, I changed how I viewed money – from lack and fear – to one of abundance. Most importantly, I learned how to make financially confident decisions that aligned how I used my money with my goals and values. It felt great.

It wasn’t until college that I realized what a special gift my father gave me. Many of my friends and classmates had not been taught how to handle money wisely. Money wasn’t discussed in their homes, so they learned by trial and mostly error. I wanted to help them and became a Certified Financial Planner (CFP®). For the past 22 years, it’s been my honor to help families and individuals reclaim their money happiness.

How Money Habits and Beliefs Are Formed

One trend I noticed repeatedly was that many of our money habits and beliefs formed when we were children, not adults. We observed how our parents handled money and mimicked them, inheriting their money hang-ups along the way. We then grew up to pass these same hang-ups to our children, continuing the vicious cycle.

I’ve made it one of my life’s missions to help improve financial literacy in children and make money a comfortable topic in our homes. If we can instill good money habits and beliefs in young children, they will be equipped to make better decisions with their money as adults, thus minimizing the financial problems that affect so many today.

While there are countless money lessons we need to teach our kids, there are four basic principles that every child (and adult) needs to understand. I started talking to my girls about money when they were toddlers and today, at ages 10 and 8, Lauren and Taylor have fully embraced these principles and are financially confident kids.

1. Money Needs a Purpose

This is the most important concept your children must understand: Money needs a purpose. Without purpose, money is just paper. The purpose or goals we give our money is what makes it valuable.

To help my daughters give their money purpose, we set annual save, spend and share goals as a family and individually. Every time the girls earn or receive money, they immediately divvy it up between their save, spend and share goals. When they find something they like at the store, they slow down and ask themselves, “Will this bring me closer or further away from my goals?”

I taught my girls to use their money on what truly matters to them or what makes their hearts happy by setting goals. It keeps them from spending mindlessly, and they don’t feel deprived when they choose to honor their goals over a new toy that means little to them when compared against their goals.

2. Money is Earned

There seems to be an unfortunate belief you must say “yes” to everything your kids want in order to be a good parent. I certainly want to give my girls the best life possible, but that doesn’t mean giving money on-demand. This is one of the most common mistakes parents make today.

It may seem innocent, but it easily becomes habit-forming for both parents and kids. Kids may become dependent or feel entitled to Mom and Dad’s financial support and face a harsh reality when they leave home and fend for themselves.

Sometimes Mom and Dad are unable to cut the financial cord and end up supporting their adult children indefinitely. This happens more often than you may realize and not because their children suffered a setback or emergency. They simply expect their parents to bail them out of their financial woes.

How To Avoid Becoming the Bank of Mom and Dad

I’ve worked with parents in this situation and it’s tough. Your best defense is not to be put in this position in the first place. And it starts by making sure your kids understand money is earned, not given. I provide ample opportunities for my girls to earn money through our weekly Job List.

They choose which jobs they will do, which allows them to decide whether they earn a little or a lot. If they do an excellent job, they may even earn a bonus or they may only receive partial payment or nothing at all, if they do a poor or incomplete job. My daughters’ future employers will thank me someday for instilling such a strong work ethic in them.

3. Money is Emotional

We don’t often realize how our emotions influence the way we spend our money, but our frustration, loneliness, boredom, anger and yes, even joy and love, can cause us to spend mindlessly. The two biggest emotion traps are:

Playing Keep Up

Kids today are surrounded by marketing 24/7, telling them all the things they must-have. This is why goals are so important. If your kids know what they truly want, it’s much easier for them to tune out the other noise. They instead work towards achieving their goals or the things that make them the happiest.

I “Deserve” This or I “Earned” It

Almost everyone has uttered the above phrase at some point in their lives and likely bought something to appease those feelings. It’s a bad habit to get into because it becomes incredibly easy to justify your spending.

Remind your kids that they do deserve a great life, which is why they set goals, so they get the things that matter most. Those “deserved or “earned” purchases actually make it harder for you to create the life you truly deserve, because you spent the money intended for more important things and now delayed goal achievement.

Bonus Tip: You can help your children grasp these principles by being a good financial role model. Demonstrate the behavior and beliefs you want them to emulate. For example, when you have the urge to buy something because you had a bad day, tell your kids, then tell them why you chose to honor your goals instead.

4. Money is a Gift

Money is power in today’s world, and kids realize that very early on in life. It’s up to us to teach them how to wield that power wisely and responsibly. I do it through our family share goal and by demonstrating a gratitude mindset, where money is seen as a blessing, not an entitlement.

Every day, I tell the girls how grateful for I am for things we have and are able to do. I know not everyone is as fortunate. Giving back or sharing has become a core family value and one the girls have fully embraced. They don’t fear or hoard their money, but make financially confident decisions, so they can use it with joy on themselves and others.

Start Talking to Your Kids about Money Today

Money has long been a taboo topic in our homes and it’s time for that to end. Every single child will grow up to handle money and every aspect of their life will be affected by their ability or inability to handle it well. Do not force your children to figure it out as they go, but talk to them now and help them develop a healthy relationship with money. It will be one of the greatest gifts you give your children.

Shannon RyanAuthor Bio: Shannon Ryan is a Certified Financial Planner (CFP®) and Mom on a mission to help busy parents teach their children simple, value-based principles that guide their money decisions and support their long-term financial well-being. For more tools and tips to raise financially confident kids visit The Heavy Purse or connect with Shannon on Twitter, Facebook, Pinterest or Google+.

“Learn” image by Mark Brannan at Flickr


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  1. Great points! I know a couple who is suffering the “bank of mom and dad” deal right now and they feel like there’s no way out.

  2. These are great points Shannon! And it really all does start with number 1. When your money has purpose, then everything else falls into place and controlling the emotional aspect of it becomes easier. The purpose is like the destination and when you know where you are going, it is so much easier to map it out and get there in the most efficient route possible.

    • Thanks, Shannon! Yes, it all begins with #1 and everything else follows. And it’s not hard to give money purpose. In fact, it’s a lot of fun and I would much rather lead an intentional life where I work towards the things that I truly want.

  3. Our 3 children have been a big part of our get out of debt journey. We want them to understand money and not repeat the mistake we have made.

    • That’s fantastic, Brian! And I love that you are being open with your kids about your past mistakes. It’s the best way to help them avoid repeating your mistakes. And let them know when they do make their own money mistakes that they can be overcome too.

  4. I think it’s extremely valuable to teach children early on about money and how to respect it and use it wisely. I will say though that one child learns may be different than another child. As the oldest, I saw my parents struggle and have budgets. However, my youngest brother (10 years younger than me) was only about 11, when my parents moved to a better upscale neighborhood. He didn’t see my parents struggle as much so he has a much different view of money than I do.

    • Great point! Kids definitely filter things differently and may be raised under different financial circumstances. Parents may need to adjust approaches from one child to another to find the best way to instill these money principles in their children.

    • It’s interesting how similar my situation is with Newlyweds on a Budget is. I am the oldest and witnessed my parents really struggle, balancing multiple jobs to make ends meet. My youngest sibling (sister, 9 years my junior) grew up much more financially “free” as my parents were more financially stable by the time she came around; her perspective on money is different than mine. However, growing up in the same household by frugal parents, how we view money and spend it is similar.

      • Another great point on how our children’s perspectives may differ from one another, especially if they were raised in different financial circumstances. We, as parents, definitely need to take that into consideration as one child may view money in a positive manner while a child raised where there was financial struggle may be more fearful of money.

  5. “Without purpose, money is just paper. The purpose or goals we give our money is what makes it valuable.” I LOVE this Shannon! I’ve seen this as well with our kids. They look at money and think (the younger ones at least) that it’s just paper or grows on trees. They know our goals though as they’re part of making them and setting those goals helps solidify the concept we have to work for them. Everything else flows out from that in my opinion and helps mold the rest of the conversation.

    • Thanks, John! That piece of paper has so much power but only if it we give it purpose. And it’s true our kids really do think it grows on trees (or in ATM machines) and don’t understand that it doesn’t just appear or replenish itself (I wish). I wholeheartedly agree that bring kids in on the goal conversations helps make it real to them and they understand why we make the choices we do.

  6. I love when you said “Do not force your children to figure it (money) out”. It really is important to introduce our children to the concepts of money and not leave them in the dark about it. Most children are curious by nature and will often present parents with opportunities to teach them money lessons.

    • Absolutely, Kassandra. We need to take advantage of teachable moments when they present themselves and our children’s natural curiosity. I know with our busy lives that may seem impossible sometimes but we need to make the time. So many kids leave home today with very little knowledge around how money works or how to good money decisions. They just know how to spend.

  7. This is a really good guest post on teaching finances. One thing for the wife and I we really were not taught finances and in recent years I have seeked out this information on my own basically running into the concept of financial independence. Freedom is the best thing you can get with your money in my opinion, from there on you can decide which luxuries are worth extra time working for. I hope that when I have kids that I will do a much better job in teaching finances. I always understood that I had to work for my money, that is the one concept I was taught, but I never really knew anything to do with it other than spend. Granted I didn’t like shopping for anything other than Legos as a kid so I ended up mostly being a saver by habit before college at least.

    • Thanks, Kipp! Yes, financial independence or freedom is something we should all be seeking. Unfortunately so many people have a slightly skewed view on what it is. They think being able to buy whatever they want (through their credit card) is financial freedom. Unfortunately, it’s not. But it sounds as thought you have a great grasp as to what it means for you. With the money Lauren and Taylor earn and/or receive, they know it goes towards their save, spend and share goals which they set annually. And I hope it’s a habit they carry forward into adulthood and teach their own children some day.

  8. “Money is a gift.” It’s positive, it’s good- so much better than “Money is Evil.”

    • I’ve never been a fan of the “money is evil” kind of lessons or talk. Every single person uses money and how awful that must to use your money when you believe it’s evil. Money is not evil. We choose how to use it and some people may choose to use it in a destructive manner, but that is their choice.

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