Some basic accounting principles could be part of the best lessons you could give to your child or grandchild as they enter the second learning phase of their lives. The first phase would be from birth to age 12 or so. The second phase from 13 to 24 is much more challenging. This is the age of contradiction and perhaps a little rebellion.
While it may be difficult and in many cases, uncomfortable to be fully forthcoming, I think it is vital to be honest with your son or daughter about the financing within the the household in which they belong. I've seen too many parents completely sacrifice any hopes of retirement income because they felt compelled to provide their children with every consumer oriented opportunity the child desired.
Nearly every parent wants the best for their son, but basic accounting principles often do not allow for everything. Spending more than you have is a lesson your daughter may learn from you. They are watching. It may seem like they spend all day texting or on Facebook. But in this second learning phase, they are paying attention.
I believe it is in their best interest to know what it costs to run your household. I think they need to realize what you give up for yourself to provide for the family unit. We handicap them in that third phase, (24 to 36), when they need the knowledge of an income statement and we withhold it because we didn't want to overwhelm them or make them mad. If they have no concept of budgeting because it was never required in phase two, they are set up for failure in phase three when it matters the most.
If they do what they see you do and they didn't learn how to plan, the cycle will repeat with their own kids. It may sound like too far of a reach when you read the next comparison, but if you think about it, maybe it isn't so far. We see second and third generation welfare families, because that is what they know. It might become their expectation and deter any vision for something more.
Take your teenager with you to the store. Show them how quickly the costs add up as they suggest what to put in the cart. Take the really bold step and show them your actual income statement. Let them know how much is coming in every month. Then show them how much is really going out every month. My guess is that most reasonable teenagers will have an eye opening revelation.
I don't write this page from lack of personal experience. I had to show my daughter how much was coming in each month. Then I showed her just how much it cost to bring her home from college on weekends. And how much it cost for the food that went back with her. And then I showed her how much was left each month. The light bulb went on.
Basic accounting principles are some of the best tools you can give your son or daughter. Later in our "Teach Your Children Well" series we'll go over some more specific targets. But it all begins at the real beginning. Knowing how to budget what they have coming in and knowing the difference between essential and nice to have will carry them far. In fact, that lesson alone will set them ahead of 90% of the other students in college with them, in terms of financial literacy.
Here is a link to some great lessons for kids ranging from kindergarten to college. The provider of this information is Dave Ramsey, who is included in our list of classic books, which is located in the left margin of every page.
The next generation is not required to mortgage their own future to go deeply in debt for their kids. Because they know by watching you, that you didn't do that for them. You taught them basic accounting principles. You taught them to plan. You taught them to work for the things they want in life and not expect to be "entitled" to them. You taught them to be responsible citizens and respectful adults.
You taught your children well!