Home Finance Teaching Your Family To Be Financially Responsible

Teaching Your Family To Be Financially Responsible

Advertising bombards us from every direction. You can’t flip on the TV, surf the net, or open a magazine without someone trying to pry open your wallet in exchange for the latest “must have” product. Heck, even the roadways are littered with billboards of temptation.

If you find it hard to resist the lure of society’s rampant consumerism, imagine how difficult it is for your children. That’s why it so important to teach them the value of a dollar at a young age.

Work = Money

While your children may be aware that money does not grow on trees, they may not fully understand the hard hours of grafting that you must do in order to put food in their bellies and satellite TV in the living room. That’s why it is important to open up the lines of communication and educate them about the value of the dollar. They need to know that holding on to their hard-earned dollar will not actually burn a hole in their new jeans.

Allowances are Earned

A great way for them to truly appreciate the hard work that goes into earning money is for them to have to work for it, themselves. An allowance, for example, is not something that merely appears in their hands with a wave of a magic money-making wand. No, it is something that they must earn through work.

Assign your children a regular set of chores that they must complete in exchange for financial gain–their allowance. If they fail to do what is expected of them, they will not receive payment. If they kick up a fuss–and they will–explain that if you didn’t do your job, your boss wouldn’t pay you either.

If you’re not sold on the value of giving children an allowance, you may enjoy reading Psychology Today‘s “Should You Give Your Kids an Allowance?

Teaching Your Family To Be Financially Responsible

Purchases Require Money

The next lesson that children must learn is that purchases add up. Quickly. There are a few day-to-day events that can impart this message without being too obvious.

Depending on the age of your children, appoint them as your grocery shopping assistant. Have them select items that make the most financial sense, have them keep a running tally of the prices on a calculator, and get in the habit of coupon-clipping together.

When the household bills come in, ask your children to circle the balances due and the due dates for you. This will remind them of the importance of paying your bills on time before you spend money on other things.

Needs vs. Wants

You really need to model the responsible behaviors that you would like your children to adopt. Are you able to differentiate an actual need from a mere want? If not, you will need to work on this yourself, so you can set a good example.

If you are adept at recognizing the difference between a need and a want, it is important that you pass this knowledge on to your kids. Jean Folger’s “Teaching Financial Literacy to Kids: Needs and Wants” provides a set of kid-friendly definitions and a list of each.

Stick to a Budget

It is also important to sit down with your child and help them create a budget for handling their allowance. After all, you cannot take your paycheck and spend it on Lego figures–and neither can they.

A great rule of thumb is the “1/3 rule.” Using three jars or piggy banks, label the first one “savings,” the second one “charity,” and the third one “spending.” When they receive their allowance, birthday or Christmas money, or earn extra cash through a part-time job, they will deposit one third into each marked container.

Older children can be taught how to do an actual written budget with more complex categories. If you are not used to working within a budget, you may wish to check out Mint.com’s “How to Create a Budget if You’ve Never had One Before.”

Teaching your children fiscal responsibility is an ongoing process, but the rewards will last a lifetime. And remember, those money wise kids will one day bloom into financial solvent adults–adults who can afford to look after their elderly parents in a manner in which they have become accustomed to. Bonus.

How did you teach your children to be financial responsible?