How to Teach Your Child About Financial Responsibility

From piggy banks to credit cards, there's plenty you can teach your child about money matters at any age.

Difficulty: Moderate

Instructions

Things You'll Need:

• Piggy Banks
• Banks

1. Start talking about money with your child as early as age 3. Take her to the market and explain that you earn money so that you can buy things you need.

2. Give your child a small amount of money and let her buy something on her own.

3. Begin giving your child a small weekly allowance when she is 6 or 7 years old, and set guidelines about how she can use the money.

4. Pick a date, such as a birthday, on which to give your child an annual raise. Increase her responsibilities as you increase her allowance.

5. Avoid withholding allowance if your child doesn't fulfill a responsibility; choose another form of discipline instead. It's hard for a child to learn budgeting skills if she doesn't know how much money will be coming in each week.

6. Start talking about long-term goals, such as saving for college or a car, when your child is between 11 and 14. Encourage her to earn extra money by mowing the neighbor's lawn or shoveling snow off driveways.

7. Consider opening a bank account in your child's name as an aid to saving and spending her earnings.

8. Consider encouraging your child to find a part-time job when she is 16 to 18 years old.

9. Consider giving her a credit card when she enters college, and discuss how to use it responsibly. Determine together what expenses you will pay for and what she must pay for. If the card is to be used only in emergencies, make that clear.

10. Teach your child about social responsibility as you teach her about money - for example, you could both donate money to a charity or volunteer your time at a shelter.

Tips & Warnings

• When deciding on an allowance amount, consider the child's age, her needs and your family's financial situation. Talk to other parents if you'd like to get an idea of typical allowances in your area, or do an online search to find various national polls on the topic.
• Encourage your older child to work and save by offering to match each deposit she makes to a savings account.
• Keep your college-age child's credit card use under careful supervision, providing guidelines as well as clearly stating the consequences of misuse.

[talia203]

on 3/12/2009 I do not know how I feel about giving a child a credit card. But, I agree with a good prtion of the rest of the article. I have a few other pointers too...http://backtobasics-talia.com

[jess9478]

on 1/20/2009 To elaborate on the credit union comment posted earlier, many credit unions offer a free financial literacy program called FoolProof. It's a Web-based program designed to teach people of all ages (they have a program for high school and college-age kids) about money, financial responsibility and the realities of the free enterprise system. This initiative is being funded by the participation of credit unions and is available to all consumers, whether or not they are members of a credit union. FoolProof covers virtually all national and state guidelines for core financial education. Check it out at foolproofme.com.

on 8/8/2006 Each time a college student makes a monthly payment, encourage the young adult to put an equivalent amount into a savings account. That way, the child can start building a nest egg for long term purchases.

on 1/18/2006 If you co-sign a credit card for your child, watch carefully (maybe using e-mail notification) to make sure your child does not miss payments and hurt your credit rating. As soon as your child's credit has been sufficiently established, remove your name from their credit card.

on 11/22/2005 Make your child earn everything.
Getting things handed to them will teach them nothing. When you work hard for something, you'll take care of it and appreciate it. What you do now will come back to haunt or
help.