How to Teach Children Financial Responsibility

In effort to teach our children financial responsible, we came up with an idea for their allowance, that's tied to a utility bill.

Things You'll Need

• Separate Housing Budget checking acct

Instructions

1. Here's how it work: We gave one child the monthly Electric Bill as her responsibility/debt. We began by averaging it over 6-9 months; let's say it's $175. Her regular allowance was $60 per month or $20 per week etc. The combined amount was $235. So what we did was reduced her allowance to $30 per month, which now combined totals $205. We now give her $205 each month, and of that she's responsible for paying the monthly Electric bill. So, she can earn more than her original amount by proactively reducing the monthly bill, by keeping lights off, unplugging unused appliances etc.

   She has over the past 3 months reduced the electric bill to approx $140-$145, which has allowed her allowance to increase effectively to the original amount of $60 per month. In addition, she feels part of helping the environment and being fiscally responsible by managing her money. She actually writes the check, balances the "housing budget" checkbook, and then pays herself. We too win by being able to reduce our budget expense by $30.

2. 

   Average your monthly Electric Bill (or any other simple bill where she can effectively manage to reduce using her own efforts, i.e water)

3. 

   Review the checkbook and check writing/balance process. Checkbook education is very important.

4. Provide some suggestion on how to reduce the utility usage, ie. keeping lights off, installing efficient bulbs, and installing power stips to computers, tv's etc.

5. Add another monthly bill (Insurance) to her responsibility, where she simply has to be sure to pay it. This isn't however tied to any allowance, simply to further her understanding of paying bills and money management.

Tips & Warnings

• We plan on teaching her how to reduce the monthly revolving credit card interest, but we don't as of now carry any card debts etc

• She's now attempting to use this same practice on me with my golf allowance, suggesting that I use "used" golf balls. I can only purchase new balls when my handicap improves etc ;-)