Teaching a Child about Financial Responsibility

Before I get to my article, I want to personally thank Donna for allowing me to contribute to her terrific blog a couple times per month. I hope to bring you some money-saving tips and related coupons to help make your paycheck go a little bit further, or like today’s post, offer some real-world parenting advice from a Dad in the trenches with 3 young kids. and teaching a child about financial responsibility. Thanks, Donna!

financial responsibility
Teaching kids financial responsibility is crucial to raising money-smart adults.

A few months ago, my 8-year old daughter walked into our family room with a big stack of twenty and ten dollar bills, close to 200 dollarsí worth.

I immediately gasped and thought, “Holy cow, my daughter held up the local 7-Eleven!” But she soon informed me that the money was from her piggy bank.

Her grandparents have been giving her money on birthdays, and other special occasions and she has been stashing it away.

Her stash has grown mainly because she didn’t know what else to do with it. It was a light bulb moment for me as a Dad, and I was a bit disappointed in myself that it took so long to get on board with teaching her about financial responsibility.

Teaching Financial Responsibility

Start the Money Conversation Early

Since that day, my wife and I have been working on some money concepts with her. If we start talking to her now about what each dollar in her piggy bank is worth and letting her buy stuff with her own money, she will develop a better understanding of financial responsibility.

But more than that, I want her to understand that money will not just be given to her for the rest of her life and it needs to be earned.

I have personally seen how teenagers go away to college, armed with credit cards, and have no firm grasp on why and how to stay out of debt, or worse, any concrete plan on how to pay off the credit card bill each month.

So the downward debt spiral begins. By starting the money conversation early with children they will hopefully have a firm grasp on the importance of staying out of debt when they start living on their own and making their own financial decisions.

Concept of Savings

The first thing we did was take $50 from her stash and we went down to the bank and opened up savings accounts for her.

It was a great opportunity to introduce her to the concept of interest and how her $50 can be used to make even more money. Plus, she found it fascinating how the bank holds on to the money for you and keeps it safe for when you might need it in the future or in the case of an emergency.

Our plan is to have her add more money to her account every few months and let her look at the statements and see how her savings are growing.

Teach Them Good Buying Decisions

Our daughter needed a new bicycle as she outgrew her old one. So we told her she could use her money to buy herself a bike. So off we went to several stores to do some research on the type of bike she wanted. The dreamy bike she loved, equipped with gears, and all the bells and whistles, would have used up all her money.

Upon telling her this, her immediate reaction was, “That’s OK, I want this bike, I can use all my money on it.”

I then sat her down and explained that she could make that decision or she could buy a cheaper bike, but one that would still work great, and have money left over to buy something else she may want in the future.

Initially, that was a very hard concept for her to understand because she was so enamored with the expensive bike. She was in the I want it now, give it to me now, my life will suck without it mindset. I can relate as I am the same way when I see the new 3D flat-screen plasma TV at Best Buy.

But we were able to talk it through, and in the end, she realized the cheaper bike was just as good, and she liked the idea of having money left over for a snowboard this winter.

Real-world buying decisions and their consequences were on full display that day.

Let Them Earn Money

My wife and I gave our daughter the option to collect, sort, and turn-in our recyclables as a job in which she could earn money. She took to the job immediately and does a great job collecting and sorting our cans and bottles.

Every couple of months, I help her load the recyclables into my truck and we take them down to the local recycling center and she helps the man unload the truck.

She then gets to sign her name on an “official paper”, gets a piece of candy, and usually around $20 per trip. You can see in her eyes how proud she feels upon completely the task and earning money in the process.

It has been a great learning experience for her and I encourage you to do the same thing with your children.

Do I think my strategies with my daughter are the best thing since sliced bread? Absolutely not. Truth be told, I am a complete rookie at this whole parenting thing and am learning more by trial and error than anything else.

I have found the most important thing is to keep it at their level and talk about money in a way they can understand.

About The Author: Kyle James is the owner of Rather-Be-Shopping.com, a site dedicated to helping consumers save money with online coupon codes. He also has a blog that discusses frugal living and the adventures of raising three “active” kids.