Teaching Children Financial Responsibility

Teaching Children Financial Responsibility

Jun 03, 2020Joey Cipriano

          Money. It can be a stressful topic for a lot of adults because so many people struggle to make ends meet and have a hard time sticking to a budget. In some households, the topic of money was considered taboo and never discussed in front of children. But children who grow up without the concept of financial responsibility often end up falling into the same financial pitfalls as their parents.

          Teaching children financial responsibility to children doesn’t have to be difficult or embarrassing. The sooner children learn how to manage money, how to save, understand taxes, and have a concept of charity, the more responsible they will be when they finally start making money for themselves.

          For families that provide an allowance for their children, these tips will be easier to apply. However, teaching financial responsibility can be as simple as taking kids shopping with a budget and showing them how money works using real world examples.

Tips for Younger Children

  1. Forget the Pink Piggy Bank and Use a Clear Jar - While the piggy bank is a classic way to encourage kids to save money, they can’t really see the money they’re saving. Instead of hiding all that change, let them see it in a clear jar. This will get them excited about trying to save money and let them see the jar filled to the top!

  2. Money See, Money Do - Parents know kids pick up on everything. If there are certain habits you don’t want them to learn, it’s best not to let them see you or stop doing them entirely. For example, if you’re habitually paying with a credit card, they may start to believe that if they want something all they have to do is swipe the card in the card reader. They will have no understanding about money.

  3. Explain that Everything Costs Money - When your child sees something they want in a store, explain to them how much it really costs. If something is $5, it will be five dollars plus taxes. Then, take the money from their savings jar and show them that in order for them to get what they want, they have to either have money or they need to save up for it. They’ll eventually learn that the things they want have a price and they’ll need to fill up the jar if they want something really special.

Tips for Older Children and Pre-Teens

  1. Explain the Concept of Opportunity Cost - Opportunity cost is as simple as explaining that buying one thing today means not having enough money for something else you might like in the future. For example, if your child saves up for a video game, but then decides to go to a concert with friends, they will only have enough money to buy the game or go to the concert, not both. This will make them have to choose the option they feel is best for them.

  2. Decide if Allowance is for Chores or Just Because - Many parents debate the idea of giving children an allowance. Some may feel children must earn an allowance by doing chores around the house, while some parents feel giving kids money allows them to learn financial responsibility on their own and lets them learn about money early.

  3. Just Buy Things on a Whim - Impulse buying is a great way to destroy a budget quickly. Avoid doing it when kids are around and definitely avoid letting them buy things like clothes or technology simply because they want it at that moment.

  4. Teach the Value of Charity - It’s important to stress the importance of giving at a young age and let children donate to a cause to which they want to donate. Teach them that giving helps those who may not have the opportunities they have or may have fallen on hard times. By being charitable, they are helping those people or families by simply giving a few dollars they’ve saved up.

Tips for Teens and Young Adults

  1. Teach the Value of Appreciating What They Have - Stress to your teen that having money in the bank doesn’t mean they can spend it anytime they want something new. It’s important that they don’t fall into the trap of wanting the things they see on social media.
    Brand new cars, massive sweet-sixteen parties, expensive vacations are just a few things teens might want for themselves but know they can’t afford. Teaching your teen the value of contentment starts by reminding them they are more fortunate than many other people simply for having money saved up or by simply having a roof over their head.

  2. Bank Accounts - Once your teen has saved up over the course of a few years, it’s time for them to have their own bank account where they can monitor their spending for themselves. Show them how to read their bank statements so they can see just how much money they’re spending, making, and saving.

  3. Saving Up for College - Every penny helps when it comes to finally having to make the transition to college. Having a part-time job can help increase your teen’s savings account if they continue to apply the savings methods you’ve been applying since they were young.

  4. Pitching in for Their Expenses - If one thing is certain in life, it’s having to pay bills. More than likely, your teen has their own cell phone and spends quite a bit of time online. Encourage them to save money to help pay for their share of household expenses, especially for things they use the most. They can pay for their own cell phone plan or pay a portion of the Internet bill, which will significantly help out mom and dad.

  5. Warn Them About Credit Cards - Many adults fall into the trap of credit cards and end up amounting hundreds, even thousands of dollars of debt they can’t afford to pay back quickly or at all. But, building credit is important for teens in case they need to make purchases immediately in college. But it should be explained to them that they should only use a credit card for purchases they know they’ll be able to pay off immediately.

  6. Sign Up for Budgeting Apps - There are many different types of budgeting apps to help people better manage their money. As teens spend an ample amount of time on their phones already, budgeting apps can show them where their money is and how they’re spending it in an easier format than a simple bank statement.

  7. Help in the Job Search - If your teen wants more money in their pocket or wants to save up for something much larger like a car, then they’ll need a good paying job that can help them reach that goal faster. Help them by finding job they can fit into their schedule and that will pay them what they need to reach their goals quickly

    Thanks to the Internet, teens also have the option of being entrepreneurs. Whether it’s designing clothing, making handmade items, or reselling things they’ve found in stores, teens can start their own business from the comfort of their own bedroom and begin making money.

          How do you teach your kids financial responsibility and what’s your stance on allowance for kids? Should they have to earn money by doing chores or do you simply give them money? Leave us a comment below and let us know your thoughts.

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