Teach your child to become financially responsible and you’ll give him or her one of life’s most valuable lessons. Too many parents find out too late in life that their children have little or no financial responsibility, often leaving Mom and Dad to pick up the pieces when the creditors come knocking.
So how do you make sure that your children are able to live within their means and aren’t likely to rack up mountains of debts – which you may very well have to pay off?
In order for your child to learn how to manage money, he needs to be given some. If your child is old enough to demand to be bought something and to perform simple chores around the house, then he is old enough to start receiving an allowance. Many parents work on the basis of one dollar equivalent to a child’s age, although depending on the number of children you have and your overall household income, this may be beyond your budget. However, it’s not the amount that’s important; it’s the fact that your child has money of his own that he can start to take control of and manage.
Once your child has her own allowance, she can start to learn the process of simple budgeting. However, while you can teach your child that in order for her to be able to buy a new game for her console she will need to save her allowance, or a proportion of it, instilling financial responsibility in a child takes a little more than just words. Children learn by example, and how you react to her demands can have long-lasting effects on her attitude to money. For example, if you always give in to her pleas of “please buy it for me, Mom,” you may be setting yourself – and others – up for trouble in the future. The child who resorts to begging to get what she wants is likely to grow into an adult who exhibits the same behavior. It’s important to teach your child the principles of delayed gratification. We live in a world where we can generally access what we want whenever we want. Unfortunately, adopting this attitude to our spending habits has led, in part, to our current obsession with credit cards.
Encourage your child to save for something he wants by promising to match the amount he saves, or to give him a percentage of the saved sum. In addition, when it comes to big-item purchases or spends, such as vacations, give your child the opportunity to earn extra money by carrying out additional tasks around the home. Don’t penalize your child for anything by withholding his allowance; he needs money in order to learn to control and manage it.
As the best way you can teach your child financial responsibility is by example, when you shop together let your child see you checking-out price tags of items and making discerning purchases.
When buying items with a credit or debit card, explain to your child why you’re doing so and the result of paying this way. Don’t let your child believe that a debit or credit card is a magic piece of plastic that can buy whatever the card-holder wants!
Look at how you and your partner handle your finances to make sure that you’re projecting a positive example to your child. Keeping a separate checking account in order to hide purchases from your partner isn’t the best example to set. Avoid any conflict with your partner, and its potential effect on your child, by communicating with each other honestly about your respective spending and budgeting practices. Allocating a sum for each partner’s personal spending is one way to avoid having to hide purchases from each other. You can also agree to discuss if either one of you needs to spend beyond an allocated sum at any time.
Involve your child in your budgeting process to help her learn the principles. For example, when grocery shopping, let your child know how much you have to spend and keep a check on the cost of items you load into your cart or basket. If your child wants a packet of donuts added, and this isn’t included in your shopping budget, explain that you will have to forego something else in exchange, or include them in next week’s shopping budget.
In a similar vein, teach your child that money doesn’t equate to satisfaction. Show him how he can have fun without spending money, or spending just a small sum. Shop together at thrift stores, set aside a patch in the yard where he can grow plants and vegetables, and take up activities such as cycling to school or kite-flying in the park.
Educating your child to be financially responsible will mean that she’s better able to enjoy an independent life, free from the worry of debt and financial insecurity. It’s a lesson that you, as well as your child, could one day be very grateful you gave.
