How to Raise Financially Responsible Children

As parents, we want to teach our offspring to design happy and healthy lives. In this blog, I will help you apply this philosophy to the money part of your children’s lives. Let’s face it; we all have to deal with money issues every day of our lives. Even if we don’t actually spend money every day, our mortgage or rent is adding up; our car loan is increased by interest and so are our utility bills. If kids grow up with these lessons of how to manage all of this, they will be comfortable with this part of their lives.

This is a great gift to give to your kids.

Let’s get started:

My goal is to start you on the road to raising financially responsible children by offering some tips and tools. I will help you begin lifelong lessons to inspire your kids to earn the money that they spend, share and save.

Back to basics

I start by teaching kids the basics of money, which is: The only way to get money is to earn it; there is no entitlement program in life. So, I recommend that kids start by earning an income — an allowance.

Child’s definition of income: This is any money your kids will receive as the result of work, through interest on savings, through investments or that is received as a gift.

Challenge your children to think of ways they could earn money. For instance, dusting, taking out garbage, feeding pets, helping with dishes, recycling, raking leaves, etc.

Allowance system

I believe there should be two types of chores within a household: Citizen-of-the-Household chores, where they don’t get paid, and Work-for-Pay chores, where they do receive pay.

Citizen-of-the-Household chores

Any functioning household needs its members to pitch in and do things that help the whole family. These are what I call Citizen-of-the-Household chores. You are the CEO of your home, so you decide upon those responsibilities. In my household, my kids had to keep their rooms free of breeding diseases, and they didn’t get paid for that. You may decide, for instance, that your kids have to clean up their toys, help with the grocery bags, make their beds, put clothes in the hamper, or go to bed on time and brush their teeth.

Make a simple chart for each young child (aged 3–6) and list their responsibilities on a weekly basis. After they have completed each task, let them put a check mark next to it, and then you inspect to make sure they have done the task correctly and put a star or a sticker next to the item. Celebrate their success.

Work-for-Pay chores

This is just that: The kids perform work and for that they will receive pay. Again, you get to select the chores that are age appropriate; for your young ones (ages 3–6), you will do the chores with them, so they understand how to complete each task. You will also create a Work-for-Pay chart for each child delineating the weekly chores. The chores will be age appropriate, and each child will only have to complete chores four to five times a week, depending upon their schedule (unless it’s feeding the pets). They put a check by each chore when they think they have completed it, then you inspect to make sure that is the case.

Sample jobs for kids ages 3–6

· Set the table (except knives)

· Clear the table

· Put used napkins in recycling

· Collect small waste bins

· Separate whites and colors

· Simple dusting

Sample jobs for kids ages 7–12

· Vacuum

· Recycle

· Laundry (Have them start with their own before you let them wash your clothes!)

· Feed and walk pets

· Water plants (inside and outside)

· Shovel snow or sweep walkways

How much do you pay?

It’s important that kids have a set amount they earn per week, which increases with age as they take on more responsibility. Pick one day per week that is Pay Day. I like Fridays, because that is the end of the week. With regard to payment, if you can afford it, I recommend paying the kids their age per week or half of their age per week. That means that a 5-year-old would get $5 per week, or $2.50, depending upon how you want to compensate them. I do this because you will see that the next part of the allowance system is the budget. The rules are that the kids must complete all chores in order to receive their money, just like in real life. Try to instill the values of taking pride in a job well done.

The budget

It’s important to make the budget as visible as possible. Get four clear plastic jars (using four envelopes is another option), and help your kids divide their money as follows:

Charity Jar

A portion of your child’s pay will go into each jar, beginning with 10 percent going into the Charity Jar. It’s important to instill your values of giving into your children. Pick a charity that is important to the family and let your kids give there. It’s also important to volunteer with your kids, so they learn to also give of themselves.

Quick cash

Next, 30 percent of your child’s allowance goes into the Quick Cash Jar. Your kids worked hard to earn their allowance, and Quick Cash is instant gratification. This is all the money you may hand your kids when they start to nag for things, for instance in the grocery store. You set the rules; if it’s no sugar, it’s no sugar, but beyond that, they can choose how to spend their Quick Cash. When they run out of money … that’s it until next week.

Medium-term Savings Jar

Third, 30 percent of your child’s allowance goes into the Medium-term Savings Jar. You are teaching your child to push off instant gratification to set a goal and save for something they want. Your young ones should only save for about two to three weeks — that is a long time for them. For your older kids, they can pick a more expensive item and save for that. If the item is expensive, like a fancy bike, you don’t want them to be 30 years old when they get that. If your child is working and saving in a responsible way, you could do what I call their 401(k) Savings Plan and match dollar for dollar.

Long-term Savings Jar

Lastly, 30 percent of your child’s allowance goes into the Long-term Savings Jar. You are teaching your child the habit of long-term saving. Does a 6-year-old child understand the concept of long-term savings? No. Does a 12-year-old understand the concept of long-term savings? No. Do the adults in America understand the concept of long-term savings? No. Wouldn’t it have been great if that was a habit you developed as a young child?

That money goes into a bank account for your child, and they can even learn about the stock market when they are around 10–12 years old.

Congratulations! You are on the road to raising your children to have a healthy attitude toward money and to never confuse net worth with self-worth.

Written by Neale, published author specializing in teaching kids and their parents to be money savvy. I’m the proud mom of two kids and two amazing grandchildren. My Dad was a WWII vet and I even had a family member in the AMERICAN Revolution!