6 tips to teach kids financial responsibility
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I am a doting auntie. My goal was to become the "world’s greatest aunt." I went all out for birthdays, holidays, and just because. As more nieces and nephews were born, I was spending a small fortune on "stuff." My father chided me, "Stop giving them gifts! Unless it’s their birthday, make a gift a reward for something earned like hard work or they’ll grow up expecting something for nothing." As my dad warned, the gifts became expected. Typically, I would ask my nieces and nephews for a list of things they wanted for their birthday and would pick from that list. Their lists were as long as my arm.For my niece’s 5th birthday, I could not shop for her gift, so I gave her a gift card. When my sister took her to the toy store, she did not return with any of the items that were on the list she gave me. When I asked her why not, she replied, "Auntie, if I bought one, I would have spent all of my money. These toys were on sale, so I got more for my money. Plus, I still have money on my gift card!" I was blown away. If it’s my money, you want the world. If I give you money, you instantly understand the value of dollar and how to budget!
I opened savings accounts for all of them. Unless it was their birthday, whatever funds I gave them, half had to go in their savings account. The rest they could use for pocket money. I told them that they could not touch their savings unless it was an emergency. Hilarity ensued when I received phone calls and text messages on what constituted an "emergency." No, Pocket Polly and True Religion jeans did not qualify as an emergency. However, when one called to use her savings to purchase a book at the school’s book fair, the bibliophile in me gave in. I did not allow her to touch her savings. I gave her the money for the book.
To encourage employees to donate to charitable causes, some employers offer matching donations. My father used this technique when I wanted something that I thought was necessary. I just had to have a pair of leather fringe boots with a kitten heel. It was the 80s, don’t judge me! My dad said, "I won’t tell you no, but if you save half then I’ll come up with the other half." It begged the question, did I want it enough to work for it?In high school, my Latin class hosted a trip to Greece. I wanted to go. The cost of the trip was the equivalent of two months’ rent for my parents. I told my dad that I wanted to go to Greece. He replied, "If you come up with half, I’ll work over time for the other half." My mom protested because they were trying to save to buy a house. When a generous benefactor paid half of my trip fee, my mom said they couldn’t afford it. My dad replied, "I promised. Plus, we’ve never been to Europe. She can go for us." He worked over time to cover the other half. That’s when I decided that if I had kids instead of telling them no, I would incentivize them like my dad did for me.
I believe that each child should be supported in developing their talents. However, I don’t want to buy uniforms and equipment only to find out they no longer want to participate because their best friend didn’t make the team or the girl that told them they would look cute in a uniform doesn’t like them anymore. I want to make sure this is a good investment and that I will receive a return on my investment (ROI). Therefore, I put a condition on funds. I will support your extra-curricular activity if you maintain a "B" or better on your report card. I want them to appreciate the value of my financial investment and to put some equity in the game. If grades are not acceptable, then I withdraw my financial support.
Yes, there’s FreshDirect and Peapod, but like multiplication and long division, one must learn the old fashioned way before using a calculator. As a teen, my sister and I could not wait to get our driver’s licenses. My parents quickly taught us that driving the car was a privilege to be earned and not a right. If we wanted to use the family car, we had to earn that privilege by handling grocery shopping for the week. My mom would give us the grocery list with prices for each item and give us a check. We also had to pick up Granny for her errands. As a teen, this seemed an annoyance, but it taught us how to shop and budget. When I was older, I appreciated the memories and stories driving Granny around town.When my nieces and nephews would spend the weekend with me, we would make a grocery list for what we needed for breakfast, lunch, and dinner for the weekend. Then we would go shopping. I taught them not to grab what is at eye level, typically higher priced. Check the prices and the weekly sales ad. Although, I did explain that just because something is cheaper does not mean it is a bargain. I never buy generic mayonnaise or detergent, always a disappointment.
When puberty hits, teens enter that funky stage. It’s the stage where you say things like, "I love my teen, but I don’t particularly like them at this moment." When my nephews became teens, I also mentored high school teens in college and career preparation. I grew tired of the teens whining about their parents saying no to their requests for the latest gadget or fashion accessory. Therefore, I introduced the Budget Worksheet. I told them to imagine they are a family of four living on $40k a year. They had to complete the budget worksheet of paying mortgage/rent/utilities/car note/insurance/doctor appointments/groceries/gas/public transit/etc. After the bills were paid, I asked them to figure out how to get the latest iPhone. It teaches how to prioritize needs (necessities for living) versus wants (desirable but can do without).
I know some parents don’t want their teens to work. However, a summer job is the perfect cure for teens who yell, "I can’t wait till I get older and move out. No one will tell me what to do." Really now?! A summer job teaches life skills. A job is not independence, it’s a boss and a supervisor telling you what to do and they may be horrible people. A summer job teaches how to deal with difficult personalities – people management, time management, and networking. The first paycheck is always entertaining. "Where’s all my money? I worked all those hours." Welcome to FICA, taxes, and being an adult. If your teen ever threatened to drop out of high school, a minimum wage summer job will give him pause. A summer job has the added benefit of teaching them to open a checking account, set up direct deposit, manage their balances, and file taxes. Referrals are the name of the game in this economy. Learning to build relationships for job references and recommendations for college applications is an asset.
There are several apps (free and paid) that can help you teach your children the importance of money management. The apps vary depending on the child’s age and the operating system (iPhone/Android). If you feel unsure about talking with your kids because you haven’t been the best at money management, then start here. It could be a great learning experience for you and your child.Student loan debt is strangling college graduates. Equip your kids early about financial management. Have them at the table when you are paying bills online and discuss financial planning and investing. Explain to them about wills, insurance, and inheritance. Knowledge is power. Give your children the gift of financial independence. Start early.Image: Pintoy
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