How Can You Set a Good Financial Example for Your Kids?

It's our turn to teach our kids that while times change, certain values remain the same. That's not old-fashioned; it's just smart.
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Dear Carrie,

My dad was a great provider when we were growing up. He worked at the same company for more than 35 years and even has a pension. It's such a different world today. How can I be the best example and provide for my kids when the job market is so uncertain?

-- A Reader

Dear Reader,

I love questions like this because they give me the chance to restate some old-fashioned values that most likely our fathers shared -- and that still hold true. Yes, the economy is more uncertain, the job market has changed, and traditional pensions have pretty much disappeared. But the foundation upon which both your father and mine built their financial lives has more or less stayed the same.

That foundation put hard work and wise money management front and center. And to me, if you can pass those principles on to your children -- and lead by example -- you'll prepare your kids for whatever the future holds. Because, just as our world is different from our fathers', our kids' world is bound to be different from ours.

Here are some tried and true ways to help you create more financial stability for you and your children in spite of these uncertain times.

1. Live below your means.

Simple as it sounds, this is hard for most people to do. We're bombarded with the idea that we have to have the next new thing. But do we? This harkens back to the basic concept of "needs" versus "wants."

Some things are essential, like housing, food, insurance and transportation. Others are "nice-to-haves," like travel, the latest technology, or the most recent fashion fad. Look at your own life and see if you have established clear priorities.

Start by making sure you have a workable budget, clearly outlining your needs and wants and how much money you have to put toward each. Then make a commitment to stick to it. Review it periodically; even share it with your kids as appropriate.

I'm not saying you always have to deny yourself. I'm just suggesting that you carefully consider each expenditure and make a conscious choice about it. If it's something your kids want, involve them in the decision-making. And if it will push you beyond your means, be honest about that.

2. Make saving money a part of everyday life.

By making a conscious decision about every purchase, you'll also be able to see where you can save. And saving is an old-fashioned value that never goes out of favor. It's essential, especially for retirement. Your dad is one of the lucky ones with a pension. Today, we have to create our own retirement security.

Set some savings goals and talk to your kids about them. When they can't have something they want, tell them where that money is going instead. It may be toward your retirement, or their education, or a family vacation. Whatever your goals, help your kids see the importance of working toward them. You might even have them contribute in some way.

3. Avoid bad debt.

This goes hand-in-hand with living below your means. By bad debt, I mean high-cost consumer debt such as credit cards. If the only way to buy something is on credit -- and you can't pay off the balance when you get the bill -- you should proceed with caution.

That doesn't mean avoid all debt. A debt such as a mortgage or student loan can actually work in your favor by providing opportunity in a low-cost, tax deductible way. On the other hand, credit card debt is costly, especially over time, and can derail your other financial plans if it gets out of control.

Sure, credit cards make life easier. But teach your kids how to use them wisely -- and make sure you always do the same.

4. Get your kids involved early.

Talking to your kids is a good first step, but for them to really learn about money, they have to have money to work with. As early as age five or six, kids can start to handle a small amount of money and make decisions.

Consider giving your kids an allowance and make them responsible for certain things, even if it's just a treat or a movie. Open a savings account and have them put part of their allowance or money gifts toward a future goal. You might offer to match their savings as an incentive.

Once your kids are old enough to have earned income, you could open a custodial IRA and get them saving for retirement early. And when they're young teens, you can start to explain the basics of investing, focusing on the need to diversify and the importance of thinking long-term.

These aren't new ideas. You probably heard some of them from your father. I certainly did! And I'm grateful to my dad for always being a good example, as yours is. Now it's our turn to teach our kids that while times change, certain values remain the same. That's not old-fashioned; it's just smart.

Happy Father's Day!

Looking for answers to your retirement questions? Check out Carrie's new book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."

Read more at You can e-mail Carrie at This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.


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