How to Teach Your Kids Financial Responsibility

It’s a lesson everyone has to learn sometime – how to handle personal finances and money. And it’s one that children should learn at an early age, so as to better prepare them as they soon head out into the working world and have to independently manage their own finances. Too many young adults struggle with taking care of their financial basics, and overspend when they should be setting funds aside for required payments.

Help prevent that by giving your kids important lessons on money matters with these five useful tips.

Pay children for special work around the home

Regular household activities such as doing the dishes or folding laundry shouldn’t result in a cash payment for children – such ho-hum chores are a part of life’s regular (and unpaid) duties. But when it comes to bigger at-home assignments, consider giving a child a cash reward. Some potential examples here include washing the car, or shovelling the sidewalk.

Chipping in a bit of cash for such duties will give the child a bit of money to play (and learn) with and also teach them that hard work is worthwhile.

Set up a savings plan

Once a child is earning some money, make sure they have a plan for what to do with it. This means setting them up with a bank account and then laying out rules so they don’t spend it the moment it hits their pockets. A popular guide here is having them save one-third of their pay, keep another one-third for spending money and then having the final third given away to a charity or cause. This will instil in them good habits about setting money aside.

Set up a goal and then match their savings for it

To help a child learn about the importance of setting aside money for a big purchase, parents can consider matching this amount on a dollar-for-dollar basis. This will help motivate a child to not spend their money the moment they have it.

Ease them into budgets by having them help plan family spending

It can be hard for children to understand the real-world cost of things. Help them learn by assigning them a simple family spending task, such as budgeting a meal. Once they have their total budget amount, they can get some useful experience by going to the store (alone or accompanied) and figuring out how to meet a goal within a certain financial limit.

Let them misspend their money

Remember, mistakes are learning opportunities. So when (not if) a child errs and spends their entire budget in one go, don’t hold it against them. But make sure to talk them through about the lesson and help them understand how to avoid making it again.