Teaching Your Kids Financial Responsibilty

Have you ever found yourself thinking – Kids these days know nothing about handling money – well you are not alone. Some great information available on how to teach Warren Buffet-esque financial responsibility, but time is always of the essence. I found financial advice that shows how you can show your kids the Dos & Don’ts of money through 3 Everyday Events by John Schmoll – founder of Frugal Rules:

Americans, especially younger generations, are struggling
with financial literacy. The popular  “Jump$tart Personal Finance Test” showed that 63% of nearly 6,000 high school students failed their test on financial literacy basics. Living in a society that struggles with credit card debt, student loan debt, and an overall lack of fiscal discipline should motivate us to involve our children in money decisions around the home. Simple ways to teach your children about money can be found in everyday activities.

Don’t Stop at No
How many times have you been at the store and turned down your children when they ask to buy something? This is a teachable moment.

Shannon Ryan, a certified financial planner and author of The Heavy Purse says, “children need to understand Mom and Dad have a valid and thoughtful reason behind the ‘no’ to help avoid feeling of deprivation. When those feeling of deprivation are not addressed, it can cause children to feel resentful and tell themselves that they will buy whatever they want, whenever they want when they grow up.”

This is a great opportunity to point your children to your family goals. Those goals generally take money, and by helping your children see the bigger picture, it can mitigate that feeling of deprivation and excite your children about working as a family to reach these goals.

Save, Spend, Share
Many parents give their children an allowance. While it may be fine to reward your children for things they do, an allowance can easily make children feel that they’re entitled to receive money for nothing. Parents have now begun to define a set of chores their children need to complete, without pay, as members of the home. To earn money, they can choose other tasks from a weekly job list. That money — along with any other money they earn or receive — is allocated according to a save, spend, share plan they’ve decided on together.

This approach allows children to have a purpose or a goal for their money. They can begin to learn the importance of separating emotions from making financial decisions. This allows children to decide if they truly want a given item and to see the true cost of purchasing an item.

Involve Them in Financial Decision Making
Your children are always observing you. They hear what you say, and they see the actions your take — which often speak louder than your words. This is especially true when it comes to finances. I’m not saying you need to discuss specific dollar amounts, but allow them to be a part of the general decision making. Your children will:

• See how you make financial decisions, which is incredibly important as you begin to teach your children about money.
• See how financial decisions should be made and what is important to the family.
• Have part ownership in the overall process.