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The Power of Leading By Example

May 04, 2016

Parents must learn to lead by example. Leading by example doesn’t call for perfection by any means. In fact, if adults can learn from their mistakes and can pass on those lessons to their children.


In many high schools across the United States students will have to take an economics class.  For many, they will go through an exercise, and in some schools a big competition, to see which student can pick the best stocks over the course of a semester.  Many will not learn how to balance a check book or how a mortgage works, but will be encouraged to think that day trading is somehow an acceptable idea.  For a large portion of people finance is not taught in the home and the stock market exercise will be the only formal training they will get to prepare for adulthood.

As a parent there is a wonderful opportunity to share experiences and at the same time pass on knowledge about personal finance.  Teaching our kids how to make decisions that will increase their chances of having financial success can be a lasting gift.  The best part is that parents can lead by example and make the entire experience part of family fun.

Here are a couple important money lessons that can help direct your kids towards a successful financial future:

  1. Teaching the concept of value: It is important to share ideas such as buying generic brand cereals or shopping at certain discount stores for various home items in order to have money to go out for pizza and ice cream later in the week.  As kids get older share with them the costs for various things whether it is the electric bill, grocery bill, or even the mortgage.  Getting them used to how we make our financial decisions simply by sharing the relative value of different items will help them build an important framework.

  2. Utilizing The Money Savvy Pig: Another concept is to use the money savvy kids books and money savvy pig by Susan Beacham.  Think of a piggy bank with 4 slots: spend, save, invest and donate.  The idea is to teach how money can be used in different ways.  Take things a step further and match the invest slot dollar for dollar, or the donate slot two for one.  This simple tool can provide a fun way to guide choices and share what is important to the family.  As an adult, the concept works the same and it can be impactful to share with kids how we invest and donate.  Try turning the tables and see if you can get your children to guide your spending or donating by matching you.

  3. The decision making process: As children become comfortable with the relative value of things they can become involved in the decision making process.  The next time you need to go clothes shopping give your kids a dollar amount that you are willing to spend.  Also share with them the spending limit you give yourself, or the limit you now need to create, for various shopping items.  If your kids want to spend more then the limit you set, let them, but it has to come from their own savings.  In short order you might see your children starting to look at the sale items and even go on line to find coupons for their favorite clothing stores.

  4. Letting them take control: As children grow they often seek to have more control over their lives, thus creating another opportunity to teach a financial lesson.  Letting our kids know what we do to earn money and then discussing how this income creates choices for the family can be a great discussion.  To get kids involved use a chore chart in which a number of household chores are listed. Next to each chore have a dollar amount associated with it so your child knows what they will get each time they do that activity.  Have a long list of chores, more then what you would ever expect them to do.  The purpose is to give those options and a little control over how they chose to earn money.  A simple example for the chart is filling or emptying the dishwasher.  Each time this chore is completed they earn a little money.  Kids are smart, over time they do more and more of the chores because they will like the control that the money earned provides them.  
After a few years of consistently working through the exercises above it will be time to introduce long-term concepts such as retirement savings.  Share with your kids that you invest in a retirement plan, or show them you are starting one if this would be your first time.  Helping them start their own retirement plan and then matching the funds they put in will set them on a wonderful course.  With all those years of compound interest our children could have substantial retirement savings in the future.  More importantly, however, we are teaching them the behaviors they need to have in order to be financially successful.  It's like the old adage states: give a man a fish…  Well, you know the rest.



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Written by: Tom Elkins

Tom Elkins is a financial planner and the regional VP based out of the Boston office of Trilogy.  As a former teacher Tom makes it a point to help his clients learn more about the various financial bridges they need to cross so they can make informed decisions.  Over the past 15 years he has built a successful career working with high net worth families and closely held businesses.  Tom is also an outdoor enthusiast who regularly mountain bikes, seeks adventure hiking with his family, or can be found camping under the stars.  On rainy New England days Tom will often spend time in his woodshop building furniture.      

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