How to Raise Financially Responsible Children

Have you ever spent time thinking about your own financial decisions growing up as a teenager and young adult? Even more so, have you spent time thinking about your financial mistakes? How do we help our children not make these same mistakes? It starts with education. I’ve seen a lot of posts on Facebook over the past few years commenting on how parents wish high schools taught basic financial tasks such as check balancing, how to complete taxes, how to budget etc. While that could be a helpful class, when it comes down to it – teaching our kids these tasks are our responsibilities.
So when do you start? Right away. Kids are never too young. You can start with allowance. Your child can be paid a small sum that increases annually likened to a raise, possibly on their birthday? With that allowance, many lessons can be taught. For example, maybe one-third of the allowance is placed into a savings account that is going toward their first car, apartment or college when they reach that point. Make sure you go to a brick and mortar bank or credit union with your child to open the account so they feel the ownership involved. Another third goes toward giving of some kind whether that be at your church, if you attend one, or a charity the child feels called toward, such as Toys for Tots once the holiday season hits. Deciding what causes to donate to can provide a valuable family conversation. The last third could go toward whatever they choose to spend it on – toys, video games, books, treats, activities etc.
There are increasingly fewer ways to model financial tasks or decisions in our ever more digital world, where writing out a check has become a rare occurrence. Taking advantage of opportunities to have your kiddo help plan your vacation, or tag along when in the market for a new car, or even when making a house purchase are great learning opportunities. You can teach the need to shop around, negotiate, marketing tactics to avoid, and the importance of sometimes sitting on a decision before acting too brashly.
While it can be difficult to relinquish control, learning and mastery of a skill takes guidance, practice, and patience. Give older kids a turn maintaining the family budget, reviewing what groceries you need to buy for meals, how much they cost, and then how much is left in the budget for eating out or extra activities after grocery shopping. Or teach them to pump gas and see how much it costs to drive them to soccer practice each week or to school daily. When it’s tax season, sit them down with you and show them how it’s done!
Another easy time to include your children in basic financial decisions is back-to-school shopping. You can show them how if you have set aside exactly $100 for new clothes and shoes, it can buy varying amounts of items depending on what brands, which stores, if there are sales. They can get anywhere from 1 pair of shoes, 2 shirts, and 1 pair of pants up to double or triple that amount with savvy shopping.
Sometimes certain experiences and hands-on exercises will do more good than any lecture ever could. As a parent, modeling gratitude, giving and restraint with smart financial decisions will also provide a huge indicator of how your child will act as an adult. Anyone with a toddler or young child shopping at a grocery store is familiar with the “please, please, please” of the requests for every snack, candy or sugary cereal that you pass in the aisles. These then turn into requests for video game systems or expensive clothes etc. Sometimes saying no can be what’s best for our children.
It hurts us as parents to see our children fail or make mistakes, however sometimes those lessons are better teachers than we can be in certain situations. It’s better for a child to make a mistake and learn from it, than to not make a financial mistake until adulthood when it affects credit, living situations, job prospects and many other aspects of their life. With those that have children with specific developmental delays or disabilities, it can be helpful to discuss with a therapist how these same principles can still be instilled in your children.
In all reality, we are all doing our best and mistakes will be made along the way by both parent and child. We can do our best to teach our children smart financial decisions including delayed gratification, savings techniques, and how to give back.