Teaching
Your Kids Financial Responsibility
Having grown up in a home where finances
were never discussed, talked about, or hinted at, let alone taught, it was no
wonder that I became a financial disaster as a young adult. I didn't know how
to balance a checkbook, when, where, and how to use credit cards, how to save,
how to budget, and what to spend. I firmly believed that if I had money, it
was mine to spend on whatever I wanted. It didn't really matter if a had
existing bills to pay. Unfortunately, I also learned that if I wanted
something I could easily borrow to get it.
Sad to say, I had to learn my lessons that
hard way. After going through collections and eventually bankruptcy, numerous
debts and a divorce, being turned downed for loans and even jobs because of
poor credit, I decided it was time to pull my financial head out of
you-know-where and do something about it.
Even though I don't blame my upbringing for
my financial woes, I do wish that I would have received a financial education
to prepare me for the real world and am attempting to do a more thorough job
with my own children so they aren't caught off guard the way I was. Below are
eight things that we are currently doing with our own children to prepare them
to cope with using money responsibly:
Give the kids money to be responsible
with - Each of our kids gets an allowance equal to half of their age, and
then rounded up to the nearest dollar. For example, our son just turned 13
(God help us!), so half of his age would be 6.5, and then we round this up to
$7 a week. We find this to be a fair amount for our income bracket and is
sufficient for their needs and wants. They are also encourages to earn extra
money through baby sitting, or doing chores for other people, as well.
We believe that this 'allowance' should not
be based on behavior or grades and is not used a punishment or motivator - we
use other rewards for good deeds and disciplinary action for misbehavior.
Let the kids learn from their Mistakes
- When giving the children their own money to use as they wish they are bound
to make mistakes. The best thing that we can do is parents is to sit back and
allow them to make their mistakes and use it as a teaching opportunity.
We didn't, however, just turn the kids loose
with their money immediately. For the first couple of years of receiving their
allowance, we asked them to check with us before they bought anything and
would teach them why we did, or didn't think that it would be a wise use of
their money. After those first two years they had a good understanding of how
we felt about spending their money and had a little better grasp of wise
spending.
However, like all kids, they can get
impulsive and buy something that they feel they 'have' to have. When the
regret sets in later we attempt to lovingly use their mistake as a learning
experience and, over the years, have definitely seen an improvement.
Teach the kids about interest - I
believe that this is one of the most valuable lessons that we can teach our
kids: the dangers of compounding interest. It is so much better to teach this
now, while at home, then to turn them loose and learn this lesson from their
credit card company.
To drive this home to our kids we let each
of them borrow money, on separate occasions where they had forgotten to bring
their money with them, with the agreement that they would have to pay us back
all of the money plus 10% when we got home. For our daughter, she 'had' to
have a new cartoon for her Game Boy. We allowed her to borrow the $20 for the
video after explaining how much she would have to pay us back once she had
access to her money. Well, after getting bored with the cartoons on the drive
back home, and then having to pay us an extra $2 on top of the purchase price,
she has learned her lesson and has never asked to borrow again!
Teach the kids to Spend - Another
thing that is so important in life that adults seldom do is budget their
money. Although our children are still too young to plan their spending too
much, we do attempt to get them to plan ahead for large purchases they want to
make. If our kids want a video game, or even a new game console, and we don't
plan on giving it to them for Christmas or a Birthday, they know that they
need to save up and buy it themselves. And believe me, when a child saves for
months to purchase a new game console for over $100, they take care of it much
better than if you bought if for them!
To help our kids with their spending habits
we have a created a tool similar to a check register so that they can track
their spending and their money. This allows them to see all of their earnings
and expenditures so that they can get into the habit of watching where their
money goes now, instead of waiting until they are older and its all gone.
You can download this form here!
Teach the kids to Shop - Actually, I
have to confess, the kids kind of picked this one up on their own. By having
them buy their own games, toys, and such, they learned quickly to start
shopping around for the best prices by looking in the newspaper for sales,
recognizing when something is a bargain (our kids love going to
after-Christmas sales!), and realizing that things are more expensive when
they are brand new, especially video games and electronics.
They are also realizing the value of buying
something used instead of new. Our son likes to frequent the used video game
stores to pick up games for half the price of what he would have paid for it
new. Also, by trading in his old games that he had beaten or is bored with, he
can save another few dollars as well.
Teach the kids to Save - We require
our children to put at least 10% of all their money earned (not including
money received for gifts) into a savings account that they don't touch. We are
attempting to get them into the habit of long-term and emergency savings and
it is our hope that this money will still be in their accounts when they are
ready to retire decades from now.
Teaching the kids to live on less then they
earn not only forces them to have funds set aside for an emergency but also
teaches them to avoid going into debt. If they can get by on what they have
leftover after putting money into savings and tithing (see below) hopefully
this trend will continue for the rest of their lives.
Teach the kids to Share - We feel
that it is important to share with those less fortunate than we are and are
teaching our children to do the same. They are required to give a tithe (10%)
of all of their money earned (not including money received from gifts) to our
church.
We also support other various ministries,
where the children are encouraged to give if they wish. One of their favorite
ministries is
Operation Christmas Child, a division of
Samaritan's Purse,
where we fill shoe boxes with toys, school supplies, hygiene items, and even
candy and treats to send to needy children worldwide. Our children receive so
much joy shopping for and packaging these small gifts knowing that they are
making a difference in some other child's life that hasn't experienced the
blessings that they have.
Model Good Financial Behavior - This
is the most important step of all. We can tell our kids all of the things that
they are supposed to do but if they see us buying whatever we want, wearing
out the magnetic strips on our credit cards, buying a new car every other
year, they are going to pick up our habits.
By practicing what we preach, our children
can see the benefits of saving their money, shopping wisely, budgeting, and
even sharing. It is our hope and prayer that they are learning their lessons
now and won't have to do it the hard way later on.
