Would you forgo a much needed set of tires or get an extension on your electric bill just so your child can have the latest high tech toy? Do you overindulge your child by overspending on his/her birthday or at Christmas? If so, then you are doing a disservice to your child. The majority of children in today’s society are spoiled and have a sense of entitlement. Without a thought of how they will pay next week’s bills; many parents give their children gifts they can ill afford. This teaches your child to follow in your financial footsteps. It isn’t difficult to raise a money smart child if you dedicate yourself to follow the steps below.
Children who are not taught the value of earning and saving for what they want usually end up as adults with a great deal of credit card debt. As adults they want instant gratification. They see something they desire and all they have to do is pull out a credit card and immediately they can take it home. It’s a great feeling until the bill arrives and you’re able to make only the minimum payment. In our parents/grandparents time life was much simpler. There wasn’t the pressure to keep up with what your friends or neighbors had, aka the Jones’. If you didn’t have what you wanted you worked and saved for it. Credit cards were less popular and more frowned upon by the older generation. They valued the dollar, took pride in the work they put in to earn that dollar and wanted to spend it wisely. Not to mention the great sense of accomplishment they achieved by working and purchasing a much needed item with cash.
Give your child an advantage.....educate them on how to handle money!
7 Easy steps to raising a money smart child
- Chores – First a child has to earn his/her money. Always have daily or weekly chore list based on your child’s age and ability. MAKE SURE YOUR CHILD COMPLETES HIS/HER CHORES! No work, no pay. Remember the job doesn’t have to be perfect but it has to be completed to the best of their ability. At the end of the week offer praise for being responsible and getting the job done. Get excited when they earn their allowance.
- Allowance -Let’s say they earn $10 per week allowance. Label 4 containers as follows - Savings, Tithes, Mine, Uncle Sam. It’s up to you how to have them divide their $10 but I recommend teaching them to put $2.00 in Savings, $1 in Tithes, $2 for Uncle Sam and $5 in the container marked Mine.
- Savings – This money is strictly for saving and should be the first money to be put back without fail. Teach your child to pay themselves first. As the amount grows it will motivate your child to add more. Teach them how it feels to have money in the bank.
- Tithing – Whether you attend church or not, it’s important to have your child put money aside for giving. It teaches them to be compassionate and to think of the needs of others. I’ve found that children truly love to give but it’s not something they readily think about. They just need a nudge in the right direction. The charitable cause this money is used for should be left up to your child.
- Uncle Sam - Obviously children don’t pay taxes but this is an opportunity to teach them about how we as adults benefit from taxes. All “tax” money your child/children “pays” should be pooled. Your family should decide together how this money is to be spent. Perhaps a new video or a family night of bowling.
- Mine –This is the money your child gets to do with as they please.
- Monetary Gifts – The rules above applies to all Birthday money, Christmas money, etc.
With this plan your child is certain to grow up with a better understanding of money. They will comprehend the value of a dollar and the importance of saving. Throughout their years we teach our children many skills to keep them safe but it seems we fail to teach them financial safety. A life skill that is as important as any other. Follow this simple plan and empower your child to grow into a financially responsible adult. Remember, a money smart child grows up to be a money smart adult.