How can parents teach kids to be financially responsible?

Dale Immekus |

First, as a parent you must lead by example. If your finances are a mess, you can't possibly pass on good money management to your children. Do you and your spouse talk about budgeting? Do you plan ahead? Or do you wait until there is a shortfall? Preplanning and forethought go a long way to success with money management. You and your spouse should be in sync regarding your family budget. Consider having a family budget meeting monthly. Your child will see this and learn from it.

Teach your children about the value of money. We all should understand the concept that money is a tool, albeit an important tool but, nothing more nothing less. We use money to put a roof over our heads, to heat and cool our homes, to buy clothes, and toys for the kids, and toys for big kids, maybe a new set of golf clubs. But only if it is in the budget. 

Teach your children that there is no free lunch. You can teach this lesson by giving opportunities for your kids to earn money for the things they want.  Kids give parents the opportunity for this teaching moment daily. The next time your child asks for something, give them some age appropriate chores and reward them with an appropriate monetary compensation. Then they can buy it with their own money. You can be sure that if they earn it, they will take better care of this coveted item much more so then if it was given to them for free. 

Case in point. When my son and daughter were young we took them to the mall and gave them each twenty dollars to spend as they wished. They could spend the money on anything in the mall shops within appropriate boundaries of course. My daughter had her money spent in less than five minutes. My son had us walk up and down the mall for two hours and went home with the money is his pocket. Guess which one bought their first home at age nineteen? Lesson learned.

Of course some kids may be on an allowance. If so, the allowance should be commensurate with chores and the chores should again, be age appropriate. For my wife’s sake, please understand that kids should participate in household chores without expectations of monetary reward; such as making their beds, picking up toys, putting clothes where they belong i.e. dresser or closet but not the middle of the floor. Her father will laugh uncontrollably once he reads this.

Goal setting is a great way to teach kids about money management and is simply a valuable life lesson for youngsters. Maybe there is something big, or expensive that may seem out of reach for them. Help your child break it down into smaller pieces and demonstrate how they could save a little bit each month or week from their allowance, or from those checks inside the birthday cards they receive. Help them track the progress so they can see how they are getting closer to their goal each time they set money aside. Once they achieve their goal, you and your child will experience the joy of success. Your child will have learned, earned and experienced the results of goal setting along with the sense of achievement.

We can’t talk about money management without talking about credit. Albert Einstein said “Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t, pays it”. Please! Please! Please! Make sure your children understand this. Money can work for you or against you. 

As I stated earlier, money is a concept. We need money to survive. That being said, if all we are working for is more money, then ask yourself how much is enough? It will always be a little bit more but, never enough. That is not how I would define happiness. There are three things that you can do with money; spend it, save it or give it away. Personally, I believe we should do all of the above. When we teach our children that money is a valuable tool, one that can be used or misused, one that can work for or against us, one that can lead to reward or regret; then we have performed one of our duties as parents.  Until we talk again, be well. 


Registered Representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker-dealer and investment advisor.  Member FINRA/SIPC.  Dedicated Financial & Insurance Services and IFG are unaffiliated entities.