7 Tips for Teaching Children to Handle Money Responsibly

Written by Christy, Contributing Writer

Remember when expressions like “A penny saved is a penny earned” actually meant something?  It seems that, in the general populace, hard work and financial responsibility have been replaced by instant gratification and willful indebtedness.
The average college student graduates with over $20,000 of debt, while the average American household carries over $15,000 in credit card debt alone.  Add to that a mortgage, medical bills, and car payments and you have a more accurate picture of today's families.  It's time to move beyond average and teach the next generation to, as Thomas Jefferson put it, “Never spend your money before you have earned it.”
7 Tips for Teaching Children to Handle Money Responsibly
Set a good example. Show your children how you save for something you want, rather than charging it. Let them actively participate in the process as well as the excitement of achieving the goal. Use a large jar to collect the money or put a chart on the refrigerator to show how close you are to reaching your goal. Show them how choices you make daily, such as whether or not to get a new toy or buying used instead of new, affect how quickly you achieve your ultimate goal.

Discuss debt openly with your kids. Don't let them become lifelong borrowers. It is often effective to let them borrow money from you or a sibling, charging them interest, and showing how their need for instant gratification or their lack of savings for an emergency has caused them to pay more money in the long run. Do not let your children leave home without a thorough understanding of how, when, and if they ought to use a credit card or take out a loan.

Use wish lists wisely. Explain to them that there is a budget for gift-giving, just as in every other category in life. When they are making wish lists, show them that the entire budget can be put toward one gift or used on several less expensive items. Also show them how “junk” can eat away at the budget, not leaving enough for the item they really want.

Give your children the opportunity to earn money, whether they have above-and-beyond chores that you occasionally offer for pay, they work in the family business, or they take on odd jobs. They learn the value of a dollar far more quickly if they sweat behind a lawn mower on a hot summer's day to earn it. Do not, however, fail to teach and show that serving others out of love is very valuable in and of itself.

Show and teach the value of saving for a rainy day. Designate a portion of your children's earnings for savings. I recommend both short- and long-term savings. Children are going to have little concept of the value of savings if the money is put in a college fund. They will, however, see its worth if they have a short-term savings account for that awesome Lego set or a new-to-them bicycle.

Don't neglect the value of giving.  Whether your children are giving to the church regularly, contributing to a Compassion sponsorship, or saving to make a difference to a family through an organization like Heifer International or World Vision, show them the good that is being done through their efforts.  Hopefully, they will eventually move from giving out of duty to giving out of love.

Do not send your young adults out into the world without budgeting skills and financial know-how.  Help them set up a budget and hold them accountable to you while they are home.  Help them set up checking accounts and investments or savings accounts, and supervise the accounts until the children have shown they are ready for independence in that area.  It is a rare child that will not end up debt-ridden if not first given these skills.

Let's give the next generation a head start by equipping them to deal with money and thereby preparing them for success.
What are your tactics for teaching your children to handle money responsibly?

Christy blogs at The Simple Homemaker where she focuses on keeping life simple. She encourages her readers to "clear their life queue" of stress, expectations, over-commitment, and the lies that homemakers tend to believe that make their job so much more difficult than it needs to be.

Christy and her husband, a Christian musician, travel with their family the majority of the year as they minister in various churches throughout the US.
Christy desires to help others regain the joy of taking care of their homes, the beauty of tending to their husband and the fun of raising their children.

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