How to Help Your Child Learn Fiancial Responsibility

This is as important a life lesson as most others that we send them to school to learn, or attempt to instill upon our children. However, many parents overlook the lessons of financial independence that are important to their children's future success as well as happiness. Many parents want to give their child everything they never had - they don't realize that they are doing a great disservice to their child. Children who are given everything they want, without earning it or having to wait, expect to receive the same service as an adult. I have seen many of those young adults enter the working world and they are not properly prepared for how personal finances really work. They make poor purchasing decisions and do not understand the importance to prioritize purchasing decisions. I have listed a few things that you can do for your children to help prepare them for their future financial success.

Difficulty: Moderate

Instructions

Things You'll Need:

• Parents Time

1. 1. Give them a plan: When you give your child an allowance - you cannot continue to buy everything for them. You need to let them know what you expect them to purchase for themselves out of their allowance (movies, clothing, makeup). As they get older and receive more of an allowance or have an outside job - the expectations on them must also grow (car insurance, or partial car payments, gasoline, cell phone, etc...). Let them know what is expected of them - but do not expect more than they can possibly handle. I personally do not like the idea of young teens having constant access to cell phones, but for some it has become a fact of life. If they want a cell phone, then make them financially responsible for it (or at least partially responsible).

2. 2. Don't pick up the tab: If a child is to learn the value of money and saving you cannot always pay the difference if they do not have enough money. This means if they want that special item and they come up short on money, don't pay the difference. Your child needs to learn to make decisions on saving and they need to learn that they cannot always have everything they want whenever they want it.

3. 3. Talk to your children about your family budget. What money is coming in and how much is going out. They will understand how money can be in short supply at times. Show them why budgeting is important to meet your monthly financial requirements.

4. 4. Don't give your child a ridiculously large allowance. The reason behind giving allowances is to teach them financial responsibilities. If their allowance is too large, they will not need to learn the lessons about budgeting and prioritizing purchases. You are not doing them any service by over-indulging them.

5. 5. On Credit Cards - I don't really think that a child needs a credit card until possibly their junior or senior year in college. However, If your child has a credit card they must be responsible for making the payments. This can be a very difficult lesson to learn for your child if you have not already discussed the importance of budgeting. Your child needs to learn the difference between the "must haves" and the "it would be nice to haves" - this is where you come in. Do not pay down their credit card bills. However, if you are the one who is personally responsible for the payments, then you need to take the card away if your child is not responsible enough to make their payments or make the right purchasing decisions.

6. 6. Financial Classes: If there is the opportunity in school for your child to take a class that teaches about finances and financial responsibility, it would be a good idea for your child to take it. Many high schools have classes in personal finances.

[dtraylor]

on 10/14/2009 Good advice. I appreciate the suggestions.