Provide an allowance to learn good money management
Despite their parents having a giant bank account, the Gates children had limited financial resources of their own and had to learn how to use them wisely.
"They had an allowance," Gates said, adding that when her children wanted things, they would have to put it on their wishlist — and “maybe they’d get it from their grandparents or us on their birthday or Christmas."
Allowances are a common strategy for teaching kids about money. A T. Rowe Price survey found that 79% of parents provide one for their children. Research has shown children with an allowance understand the value of money more and better manage their own financial decisions.
One rule of thumb to help you decide the size of an allowance is to provide $0.50 to $1 per week for every year of age. For example, a 5-year-old would get between $2.50 and $5.00 a week. In providing these funds, parents can also talk to their kids about saving and managing their allowance money wisely.
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Explore better ratesLimit how much you buy for your kids
While it's tempting to indulge in every whim a child has, not doing so can be really important in developing a child’s money sense. Gates admitted they did not buy their children everything even though they had the resources to do so.
"I think it was much more of an upbringing like I grew up in — a very middle-class household where money did dictate whether I got an extra pair of shoes that year or not,” she told the New York Times. “I thought that was a good principle to have.”
Most family budgets naturally limit how much parents buy for their children. If you have a very high income, though, it may be best to restrict big gifts to holidays and birthdays, as the Gates family did.
Helping children develop a wishlist, in addition to teaching them patience and goal prioritization, is far better for their future than offering instant gratification.
Help them understand their privilege
Finally, if your children are lucky enough to enjoy experiences that many cannot afford, it's important to help them understand that this is a privilege not everyone has, and that being mindful of this matters.
"We said to them from a very early age, you know you really are not allowed to tell other people how we flew on this trip back and forth, otherwise it will separate you from other children," Gates said.
Learning how to recognize privilege helps children be more sensitive to the feelings of others and not take what they have for granted.
By following these tips, you can raise kids with good financial sense so they can build their own success in the future. If they worked for Melinda Gates, they're definitely worth trying out in your own life.
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