Parents expect to give their kids money to spend, but they don’t want them to make spending mistakes. While this is understandable, making mistakes is the one thing kids need to successfully manage their money.
Why are parents so protective when it comes to money mistakes? Some of their concern is rightfully based on knowing that adult money mistakes can be devastating.
However, as Robert Kiyosaki, the author of Rich Dad, Poor Dad, tells us,
“There’s a bit of hidden magic in every mistake. The magic is called learning.”
Money management is a skill
Money management at its core is about making decisions. Becoming skillful in any endeavor requires practice. To learn to manage money requires hands-on practice and making mistakes.
This hands-on practice does not happen in the classroom, simply because schools can’t provide real money. Schools can offer simulations, exercises, games and discussion, but not real practice.
Parents provide for other learning skills
For kids to learn a new skill like music, sports, or art, parents provide the necessary ingredients. Parents know that these skills don’t develop overnight.
Young musicians need an instrument, lessons and most of all, practice. Aspiring athletes need equipment, training, and most of all, practice.
This is true of any skill that our kids want to master. Managing money is an essential life-skill that is best learned at home.
Parents encourage kids learning new skills
When kids first sit at a piano, or pick up a baseball, parents expect wrong notes and dropped balls. But parents know the child’s hands must touch the piano keys. The baseball must be in the child’s hand. They know that their child will not master the skill if they don’t have total control of the tool, e.g., the piano, the baseball.
The same is true of money management skill. Remember when you removed the training wheels from your child’s first bike. You expected falls and scrapes, but with practice you knew your child would one day ride that bike down the street.
However, when it comes to money, most parents continue to retain control. Just like learning to ride a bike, kids will not learn how to manage money as long as parents control the money decisions.
Parents have similar role with kids and money
When parents treat money management as a skill, they can support and encourage their kids as they do with other skills. Parents facilitate, guide, cheer, and commiserate when a mistake occurs.
Parents can give their kids everything they need to learn this new skill–money, control of decisions, and spending responsibilities to manage.
A financial education at home
Although we didn’t know it at the time, we created a financial education program in our home. My husband taught woodworking, a skill that cannot be mastered without hands-on use of the tools. Our kids needed hands-on practice while we needed to be hands-off.
Money was the tool for our kids to learn money management skills. We settled on basic rules and stepped aside. Our mantra was, “It’s your money. You decide.”
More importantly, we gave them the opportunity to learn from their mistakes. A $10 mistake by a kid is a gentle lesson compared to a maxed out credit card as a young adult.
Money mistakes by kids in no way compare to mistakes made by adults. Managing money is one area where kids are safe until they legally become adults. But they need the freedom to make mistakes and learn from them while they are young.
The No-Cash Allowance is an easy to use money management system to help kids learn how to manage money without cash. Kids are responsible for keeping track of their own money so the system doesn’t break down.