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Raising Money-Smart Kids

If finances are one of the most stressful topics in a marriage, communicating about children comes in a close second. Talking about children and money in the same conversation may result in the perfect storm.

The most common mistake in teaching children about money is simply not planning as a couple how to do it.  It is important for husband and wife to discuss and decide on what is important in your particular family when it comes to money management and finances.

Proverbs 22:6 says, “Train the young in the way they should go; even when old, they will not swerve from it.”

If you are a mom or dad or grandparent here are some ideas about teaching financial responsibility to the children in your lives:

  1. Should we give them an allowance or not?

Allowances can be a good idea if used properly.  If you give your children an allowance, but still fulfill their every desire you really are not teaching them anything.  The allowance needs to be their money and the spending choices (no matter how bad) also need to be theirs.  Your role is to be a coach – training them ahead of time and doing a post game review after they have spent the allowance.

Start the allowance when they have a basic concept of money and can add and subtract.  A good target amount is between $0.50 and $1.00 per week for each year of their age.  The allowance needs to be big enough that they can buy something but small enough that they have to save in order to buy it.

The purpose of an allowance is to teach them how to make spending decisions.  They can buy a small item this week or save and buy a larger item next week.

Mom and Dad should help divide the allowance into three parts (spend, give, save). The “spend” money can be spent on what ever they want to buy.  The “give” money goes into the basket at Mass each Sunday and the “save” money is saved for a larger purchase they want.

  1. Do we pay for chores around the house?

Having responsibilities is part of living in community – even if that community is one child and one parent.  Each child needs to be assigned chores for which they are responsible. Even a three year old can place the flatware around the table at meal time. Depending on your family, other chores may include making their bed, loading and emptying the dishwasher (or washing and drying the dishes by hand), taking out the trash and caring for the family pets. The level of responsibility needs to increase as they get older so by the end of high school they are able to manage their own needs – including cooking, laundry and clothes shopping – so they are prepared for leaving home.

  1. Can they earn extra money by doing additional tasks?

This is a great idea if the parents really treat it as a job for hire. The job needs to be over and above their regular household chores and there needs to be some agreement about what gets done, when it needs to be done, how it is done and what the job pays. If they do not complete the job on time or if it is not done well, their paycheck should reflect that.

  1. Do not bail them out when they make mistakes.

Experience is the best teacher so let the kids make their own decisions and let them make bad ones. If they mess up, let them experience the consequences. If they spend lunch money on a game, then they have to make their own lunch with whatever is available from the pantry.  No additional handout from mom and dad. It’s better for them to make a bad decision with $20 of lunch money than a $300K house! Experience will help them make wise decisions, weigh different options, and comparison shop. They need opportunities to learn from their mistakes.

  1. Clothes Shopping with The Walmart Rule

Depending on the maturity of your child and how far they have come in learning to handle money, there are two ways to handle clothes shopping:

The first way is to give them a clothes budget and the freedom to buy whatever they can afford with the money you’ve given them. It’s important for them to have a must list: must get 6 pair of underwear, 6 pairs of socks, 2 shirts and 1 pair of jeans.  Go with them the first time to help them comparison shop and see what they can get for their money.

The second way is for you to control the money and pay for their clothes up to a certain amount. For example, if the jeans are $20 at Walmart, you’ll spend $20 on a pair of jeans. If they want more expensive jeans, they’ll need to pitch in the difference between the cost of the expensive jeans and the $20 limit you have defined based on the cost of jeans at Walmart.

These two methods are a lot different than the open-ended approach used by so many parents who just whip out the credit cards to buy the kids what ever they want.  So your children probably won’t like either of these methods. But your job is to raise children who will be responsible adults.  Once they are adults there is a limit to how much they’ll be able to afford and that limit is much easier to understand if they were raised with a solid financial background.

Parents are the number one influence on their children’s financial behaviors, so it’s up to you to raise a generation of mindful consumers, investors, savers, and givers.

Deuteronomy 6:5-7 says “Therefore, you shall love the LORD, your God, with your whole heart, and with your whole being, and with your whole strength. Take to heart these words, which I command you today. Keep repeating them to your children.”

The world teaches children its way of handling money, which is contrary to God’s way. We have the responsibility to teach children God’s way of handling money. We must be even more intentional than the world in teaching our children. Our thoughts influence their thoughts. We can influence them toward the holy and moral or we can influence them toward the secular and worldly.

How we train them determines in a large part their thoughts and attitudes when they are adults. Children can be taught to love things and use people or to love people and use things.

We can teach children to honor God or the almighty dollar.

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