LoboLinks | 10 Simple Ways to Encourage Financial Responsibility in Your Child

10 Simple Ways to Encourage Financial Responsibility in Your Child

Date Added: June 10, 2008 12:03:42 AM
Category: FINANCE
Set an example
As with most habits and learned behaviors, children will often do as their shown, not as they're told.  Be a role model for your child by paying close attention to your own financial responsibilities.

Create a budget
Set limits on expenditures such as clothing, school supplies, or holiday or special occasion gifts, and hold your child responsible for staying within those limits.  By establishing financial boundaries early on, your child will have a better understanding of the delayed gratification that comes from saving for one specific goal.  This will come in handy when his adult purchases grow beyond saving for a CD or video game.

Give your child a money jar
Depositing loose change into a small jar or bank is a great way to show your child how small amounts of money add up over time.

Open a savings or checking account under your child's name
Encourage your child to set aside small amounts of allowance or gift money into his very own bank account.  Then set aside a few minutes each month to go over the statement with him and teach him how to balance a checkbook. As your child matures, consider allowing him to make unsupervised withdrawals from his accounts with an ATM or debit card.

Give a weekly allowance
Your child will have a greater understanding of (and appreciation for) money management if he can apply it to his daily routine.  Allocate a set amount to be dispersed at regular intervals, and let your child take responsibility for how it's spent or saved.

Develop and encourage smart spending habits
Children often don't know how to prioritize.  Help your child distinguish between what he wants and what he needs, and make him aware that by avoiding impulse purchases and delaying gratification, he's ensuring financial success in the long run.

Share the responsibility
Involve your child in household chores such as grocery shopping, paying bills, or donating to charity.  Let him see first-hand how you set limits and stick to them.  As your child matures toward financial independence, allow him to take on some of these household tasks himself.

Encourage a positive work ethic
Instead of handing out loans or advances on allowance payments, give your child the option to earn extra money by taking on additional chores or responsibilities.  If your child has an entrepreneurial spark, such as doing yard work for neighbors or tutoring younger students in a subject at which they excel, encourage them by offering nonmonetary support.  Help out, don't hand out.
Teach your child the importance of building (and maintaining) credit
According to a recent study by USA Today, 19% of young adults between the ages of 18-24 filed bankruptcy in 2001.  Help your child avoid such pitfalls by alerting them to the dangers of mismanaging credit.  Start by introducing them to such concepts as interest rates, late penalties, and debt-to-income ratio.  When you and your child both feel he is ready to take on financial independence, decide together on the best way to begin building his credit history. 

Keep communication open
Schedule time to discuss money matters and let your child know he's free to come to you should he have questions or need advice.

Like any other household responsibility, teaching your child to make wise and informed financial decisions will take patience, practice, and discipline.  The key is to keep it simple and keep it fun!