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Kids and Money Teaching Children About Money

What is your personal commitment to the issue of kids and money in your home? Are you are in this household budgeting process for the long haul? I mean the really long haul, extending out to the generations coming up behind you. What you model and end up teaching about money now will have an incredible effect later. It includes your own your children, grandchildren, nieces, nephews, etc., and is much more than a platitude or worn out saying. It is truth.

It is my aim that you use the following guidelines for teaching your children that living debt free is not only possible, it MUST be done. It is a tutorial to change you and your children's fundamental thinking of financial priorities and spending habits. As the saying goes, "show me your checkbook and I will tell you what is important to you."

Where do you start on the issue of kids and money? By keeping to an effective written budgeting plan yourself, taking personal responsibility for your spending.

Lay down the financial ground rules early by cutting back on luxury items, discussing finances with your spouse, and agreeing on spending amounts that are realistic and make sense. Making your family budget work now will impact you and your children for a lifetime.


Will You Pleeeese Buy This?

Effective household budgeting eliminates the financial button pushing by your children, asking for things simply because they can and will usually get the item. How can this be stopped? When they ask to purchase something, discuss what budgeting category it will come out of (how the item will get paid). This is a great way to teach them about opportunity cost which is giving up the opportunity to purchase one thing in exchange for being able to purchase another.

Teaching children about money means getting them involved in the family's household budgeting process. Nothing is more freeing then saying to your teenager, "Sorry but that does not fit in our budget."

Dealing with the kids and money issue does not have to be stressful. When the budgeting guidelines and saving goals have been set, the children are then better able to know ahead of time whether a certain purchase will be allowed. And if they really want something that will over extend the entertainment category, for example, counter with, "Okay, we can take the money from the clothes or food category. What do you think?"

Or, "That purchase is fine son, but it means we need to have cheaper alternatives to other categories as our family is committed to never going negative in any budgeting category at anytime."

Letting even the younger children understand this household budgeting process is an incredible training ground for them to avoid a debt lifestyle when they are adults. Teach them that living debt free is the only successful option.


Eliminate Allowances for the Children

Receiving an allowance is nothing more than welfare disguised as "working" around the house. Every child as part of their training to be responsible and a valuable member of the family should have daily, weekly, monthly, and yearly chores that is done without pay. Kids and money works in a way that if there are other chores that need to get done, pay them for it under three conditions:

    1. All the regular chores and responsibilities are done. 2. They have not been dishonoring in their behavior. 3. The pay rate is no more than half of minimum wage.

This teaches the real value of hard work, well mannered behavior, and the knowledge that kids and money only mix well with effective parental guidance. If they object, let them create their own income outside the home using their own entrepreneurial activities. You have one chance to instill the discipline of making right choices about living debt free: do not blow it!


Spending Guidelines

Require your children to spend their work money according to your wisdom and values, not theirs. There will be very little resistance if you start this when they are very young, around two to three years old. Here are some guidelines for you to adapt for your own family:

  • 10%-Tithe
  • 10%-Giving to Charities (around 10 years old the amount is up to them)
  • 50%-Savings. Keep in an envelope until they are able to clearly write their full name small. When that happens, take them to open a savings account.
  • 30%-Spend as they please up to the point that it will not violate any family value. Even if you believe the purchase to be a waste of money, you must allow them to do it.

This is your very effective training ground for teaching children about money. I would much rather have them waste money in fives and tens and learn from it now, then do so in hundreds and thousands when they are adults. These requirements are only for money that is earned from working. Gift money falls under the 30% rule above, they may spend as they please according to the intentions of the giver.

When kids and money equal bad decisions with spending (and they will just as you do), it will sink in on their own. When they want money for something but do not have enough, "gently" remind them of their previous purchases and the wisdom of thinking through buying decisions thoroughly before spending the money. As a matter of fact, I prefer when my children waste their money early on. Again, it is so much better that they be sad over the loss of a few dollars than when they are adults and are deep in debt; if that happens it really will be sad.


Be Faithful and Do Not Grow Weary

To help in wise decisions and remove the impulse shopping mindset, require a three day "cooling off" period, just as the Lemon Law allows. This means that once their decision to purchase something above a certain amount has been made, make them wait three days. Many times, they will change their minds and want something else. Most of the time this will happen when they are young. When it does, the three days start over again with the decision to buy something different.

What is the best way to handle the kids and money issue at home? Be faithful with the guidelines above and your children will begin to mature their own financial decision making process. Do not grow weary in doing what is right. Effectively teaching kids about money is a process that lasts throughout childhood. Model the disciplines and values of hard work, thriftiness, savings, entrepreneurship, and honoring God with their money, and they will not move back home as an adult because "times are tough".

They will find their own way and be happy to make it with rice and beans, just as you did - - or should.

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