Q: My daughter recently began babysitting, and treats her income as completely disposable. She doesn't want to save or invest any of it. My wife explained that she could have more money by investing and tried setting up an account for her at the credit union, but she wouldn't hear of it. I don't want to see her develop the habit of spending everything she gets, but it is her money.
How can I show her the wisdom of putting away a little bit of her earnings, rather than spending it all on clothing, movies, makeup and fast food?
A: This is a common issue. Difficult as it is to face, children learn the lessons we don't want them to learn better than they learn the ones we try so hard to instill. They learn by example. If you're saving, and are open about why you're saving, what you're saving for, and how important it is, she'll learn to save. If you, as a parent, treat your own income as completely disposable, using everything that isn't earmarked for bills immediately, you can't expect your daughter to act differently.
Having said that, there's a lot you can do to help your daughter develop good financial habits. Have an open conversation about the family finances, and discuss what you're doing to save, and how much you're putting away each month. If you're not yet saving on a consistent basis, get started immediately. Talk about the difference between where you are now and where you want to be, and how saving money will get you there. Talk about what it is you're saving for. Set long term and short term goals. Pick something every member of the family will enjoy and start saving for it. Discuss how much closer you are to your goals every week.
Once the groundwork has been laid, offer to match or at least supplement your daughter's savings. With some understanding of savings, positive role models and a little motivation, your daughter can develop an important habit early in life.
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