It seems as if there never was a time where the future seemed more uncertain. With politicians arguing about the lifespan of Social Security and consumer debt skyrocketing, it's scary to think about how our children and future children are going to fare financially. I have listed five things that taught our children how to be financially smart.
Give them an allowance
Before you start, there are two important rules you must follow. Rule number one, they must earn it. My parents stopped giving us an allowance when we were kids because they realized we were collecting the money without doing our chores properly (or at all). Paying your children for shoddy work can make things hard on them later when they try the same trick on employers.
The second rule is to pay them what they earn. McDonald’s isn’t going to pay your kids $20 per hour to flip burgers, so don’t condition them to expect that by paying them $20 to do similarly simple tasks. Giving your children an allowance can help your children learn that once they leave the protective wings of the nest to spread their own, they will reap what they sow. In contrast, an allowance for the sake of an allowance can lead your children to view you as their personal piggy bank long after they’ve left home.
Teach them to save
In my opinion, my in-laws have the perfect plan for this. Each paycheck or week’s allowance was to be split three ways: ten percent to tithing, 50 percent to savings, and 40 percent to be spent any way the child wanted. The kids didn’t always follow the plan, but they knew it was an expectation and they understood the wisdom behind it. They learned that there are important things in the future — whether it is for college or marriage — and that giving up a little today can make those things happen. When doing this, don’t get caught up in the percentages; you can choose your own. It’s the lesson behind it that matters.
Loan them money
One of the greatest financial lessons my dad ever taught me was when gave me a $750 no-interest loan to buy my first computer. He didn’t give me a payment schedule, but he expected me to pay him back, and I wanted to show him I was responsible. Every now and then he would decrease the loan amount when I helped with big projects like tiling the bathroom or unloading a truckload of dirt into the garden. When I had finally paid off the last cent, I could just taste the liberating feeling of being debt-free. It has always stuck with me. It taught me not only to be careful about when to consider carrying a debt, but also to get rid of it as quickly as possible.
This one is tough. It's hard to know where the line is between turning your kids into professional moochers and wanting them to enjoy their childhood and teenage years. Just be reasonable. Your kids need to learn that as they grow older, they must work for what they have, just like you had to. It's so easy to "help" them out a little with little things here and there, but if you do it too much, you might be weakening them further. The best way to gauge this is their attitude about it. Do they show their gratitude? Is it an expectation? Again, I want to be careful here. You know your kids best. Just try to be reasonable with them and help them learn to earn things the way you did — with hard work.
Lead by example
Regardless of what you teach your children about finances, if they can tell you aren’t being responsible with your own finances, you and your children are fighting an uphill battle. Live by the lessons you strive to teach your children. Not only will they learn lessons more effectively, but you will also be happier and feel more secure.
In conclusion, how you teach your children about finances can truly define the rest of their lives. Financial problems are a factor in most divorces. Bankruptcy is a heart-wrenching experience. Just scraping by can lead to anxiety and depression. While money can’t buy you happiness, financial security can keep a lot of worry and pain out of your life. It can also offer you the opportunity to live your life the way you want.
Ben lives with his wife, Kilee, and dog, Paisley, in Arkansas. He has a passion for personal finance, sports, and learning. Ben recently started a blog at www.wealthgospel.com where you can find more of his opinions on personal finance. His life goals are to write about personal finance all day and start a non-profit organization to help others become self-reliant and to find their true potential. On any given day, you could find him eating homemade salsa, picking blackberries, or staying up until 3 a.m. to finish a book.