Teaching Our Kids Financial Responsibility

Train up a child in the way he should go, and when he is old he will not depart from it.
Proverbs 22:6

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 appropriately; 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. Unfortunately, I also learned that if I wanted something I could easily borrow to get it.

Even though I don't blame my upbringing for my past 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 receive a weekly allowance in exchange for doing some basic chores around the house. In addition, we also give report card ‘bonuses’ based on their grades as an incentive to do well in school.

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 as 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 for them to learn this now, while at home, then to turn them loose and have them learn this lesson from a credit card company or lending institution. 

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 that she was able to watch on her Game Boy. We allowed her to borrow the $20 for the video after explaining how much she would have to pay us back. 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.

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.

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.

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.

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.