Parents role as a financial mentor

There are many tools and resources available to help teach kids about money such as board games and online activities, but the one consistent resource is parents. Four out of ten respondents to a recent survey conducted the National Foundation for Credit Counseling said that they learned financial skills from their parents.

Most kids learn by example. If parents spend money freely, their children are likely to follow in their footsteps and become spendthrifts themselves. While parents may use outside sources to help teach financial skills, it’s important to remember that leading by example will have the strongest impact. Good financial habits encourage healthy financial behavior. Following are some tips on how parents can set the stage as good financial mentors.

Establish a bank account for your child.  According to our recent survey about kids and money, three times as many children under the age of 10 now have bank accounts than their parents did at the same age. Maintaining a bank account is a sign of financial independence and maturity.  Having a savings account is a good introduction to investing and can help children establish good financial habits.

Relinquish control over finances. Parents have the power to choose the amount and how often their kids receive an allowance. To help teach your kids financial independence, consider allowing children to decide how to spend their money. MMI’s survey found that 49 percent of parents give their children either full or partial control of how they choose to spend allowance. Allowing children to decide how to spend money will establish trust between you and your child and, depending on the age, it gives kids a self-learning experience.

Help kids set financial goals. While you may trust your kids to responsibly handle finances, it is certainly acceptable to also help guide them in the right direction. Sit down with them and help them plan their spending and saving. Teach them to budget for major purchases. When children learn to set financial goals they are better at planning and are less likely to overspend.

Have your own success story. The best way to be a financial mentor is to have a success story of your own. Share examples of positive spending habits with your kids so they can see the big picture of effectively managing money. Set a good example for your kids so they will have a platform for their own financial success.

Finally, parents wear the hat of a role model in many areas of their child’s life. Being a financial mentor shouldn’t be any different.

Renee McGruder is a former communications coordinator and grant writer at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.