Tips for raising financially smart kids

This was originally published on Monday, August 24, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

As a parent, teaching your child the importance of financial skills is imperative. Many young adults are not prepared to handle daily financial decisions and the consequences that may come with them. In this rapidly changing world, teaching your child how to manage money is more important than ever. There is plenty of misinformation out there that children hear about finances especially as they get older. It is best to hear the correct information from a trusted source. Here are some tips for raising financially smart kids:

Start early – it is never too early to start. Form an early age, explain why you work and why the family needs money. Children really start to understand the importance of money around the time they start school. As they get older, start introducing the concept of saving, investing and credit.

Teach the importance of hard work – what do most kids know about money besides the fact that there is never enough and that it mysteriously comes from mom and dad? As they get older they will soon find out that money literally does not grow on trees or come from machines and that they will have to earn it. Today’s society is full of messages of being entitled. As a parent we want to instill that a good work ethic. Sit down with your child and discover how much certain jobs pay. Of course it is not all about the money when choosing a job. The love for what you do is just as important, if not more. But it is good for them to know what the future holds and to prepare accordingly.

Involve them in the family shopping – the best way to get kids to understand that money is not limitless is to get them involved in the family shopping. It is a great way to learn how much money is required to purchase everyday items. Explain to them the importance of spending wisely and how it effects what they want.

Let them practice – give or let your children earn an allowance. Let them decide on how they want to spend their money. Give them the power to make choices. If they want to spend it all on toys and then want something else, remind them of their choices and that they will have to wait until they have the money. Help them create a list when they go shopping.   Have them total up how much it will cost and what their change will be.

Taxes – No one is ever quite exempt from paying taxes. Explain to your children that the government has to provide certain services, so we pay taxes. I have seen parents include taxes in their children’s allowance to help prepare them.

Mistakes are part of the lesson – when you started to learn about money you made mistakes and so will they. Use your mistakes as teaching points. A parent’s instinct is to help. If they were saving up for a new game and do not have the money, don’t bail them out. Let them wait and earn the money they need. By bailing them out you are teaching them that they do not need to stick to the amount they have been given. If you do give it to them, this is a great time to teach them about interest. Let them know that they can borrow the money from you but they will have to pay more than what they borrowed initially. Helping them be disciplined and understanding how credit works at a young age is a lesson best learned when the stakes are not as high.

Give back – teach your child that as a citizen of the world, caring about others less fortunate is a good thing. They can keep a jar of loose change all year long and during the holidays make a donation. They can donate items they no longer need or volunteer.

Be the role model – let your children observe you practicing what you preach. Be open about your budget and spending priorities. If you want a high price item let them observe you holding off until you saved enough. Putting instant gratification aside is a mature characteristic and one that is practiced and learned. If times are rough find a way to involve your children in an age appropriate way.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


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