How Do You Teach Your Kids Financial Independence?

TipHero - Your Guide to Saving Money

Tip Hero serves up fresh money-saving tips daily,
with over 2,000 tips shared to date.

GET FREE UPDATES:

Tips by Category:

Q & A

Home > Q & A > Topics: Finance For Kids

-----------------------------------------

How Do You Teach Your Kids Financial Independence?

Submitted by: Tip Hero 08/19/2009 11:03 AM

When you graduate high school and/or head off on your own for the first time, you may be well-versed in mathematics, literature, history and science -- but not necessarily in real life skills like balancing a checkbook and managing a credit card. Yet it seems as soon as you are handed your first dorm key or apartment key, you are also handed your first credit card.

So, how do you prepare your kids to manage the responsibility of a credit card and a bank account at a time when they are cash poor and on their own for the first time?

---
sponsored: Find Money Budgeting Tips.

---
Tip Hero serves up new money-saving tips daily.
Get free updates via Email , RSS or Twitter.

More Money-Saving Tips:

Kids Kick in Half

No Credit Cards For Kids

Raising Thrifty Children

Teaching Kids How to Manage Money

Sponsored Searches:

Finance For Kids

Credit Card Tips

Financial Freedom

College Credit Cards

Comments:

.................................

Our son was set up with a work-study program at school, (earning basically minimum wage,) and this was his only spending money. We went with him to open his first checking account to deposit his earnings. This was his discretionary spending for the year. And definitely helped him to learn that you don't spend more than you have. We didn't let him get a credit card his first year.

Posted by anonymous on August 20, 2009 11:15 AM

.................................

From age 5 onwards, my children were earning money.

I had certain chores set aside as "family" chores. These were basic things done for everyone - emptying trash, changing the litter box, dishes, and general cleanup. They had to help do these chores for free. They also had to clean their own rooms and bathroom. Those chores had to be done first, before they were allowed to work for money.

I then set up a chore list where they could earn money. This included things like brushing the dog, folding laundry and putting it away, yardwork, ironing, dusting and vacuuming.

Each week, they got to choose what chores they were doing. As they got older, I increased the chores to things like cleaning bathrooms (not their own, just the guest and master baths), mowing the lawn, shoveling the driveway, and cooking dinner.

They could choose to do no chores, such as at finals time, or they could choose to do them all.

My chore list was so comprehensive that neighbor kids would come to my house, ask if my children didn't take some of the chores on my list, and would volunteer to do the chores for the money stated.

When they got to junior high school - about 6th grade, each child was then given the family checkbook and the bills. I sat with them and showed them how to pay bills with what we had. I had them pay bills with MY paycheck first. As a part-time worker, my salary was miniscule and they couldn't meet the bills. I then let them pay with their Dad's paycheck. Then we discussed the difference. How he worked to get a degree to be able to earn good money, and how I did not do any such thing, not even a vocational type school. Although I have many life skills, my earning power was miniscule.

I explained that I had not planned well and if anything had happened to their father, I would have a hard time raising them adequately. I stressed the importance of college or technical training that leads to a career that is usable.

This made a huge impact and both children went on to college to get practical degrees that insured good paying jobs.

One is debtfree and working to buy a house and car outright when she returns from overseas.

The other is almost debt-free (car and hurricane damage bit deep into her savings and credit). She is considering a mobile lifestyle and is debating investment in an RV.

Posted by anonymous on August 20, 2009 2:48 PM

.................................

I bought all three of my kids (5,9 & 11) the Kids Wealth Money Kit (kidswealth.com). Since it explains how to pay your children, how they should divide their money and what they can spend their money on - the kids now have control over their own financial lives. And as they grow older it will form solid habits so they won't be in the debt boat like their parents.

It's a basic program in which you pay your children a lump sum once a month, they divide the money into five different wallets. They have complete control.

I thought the program was a bit pricey, but after seeing the wonderful results it has given the entire family, it was worth every penny! And my kids no longer ask me for money or candy or toys or anything else they "want" in stores.

Posted by anonymous on August 20, 2009 6:25 PM

.................................

How do you teach your kids financial independence? Two words - Dave Ramsey!

Posted by anonymous on August 20, 2009 7:36 PM

.................................

The way I taught my children financial responsbility was to make them earn their allowances. I bought a dry erase board, and made a seven day calendar across the top, and on the left side,I wrote each child's name. Under each day, I put age appropriate chores, with a price for each. (feed the dog,$1.00, set and clean off the table,.50,wash dishes, $4.00, etc.)

I would check each chore off as it was completed for that day. At the end of the week, I added all amounts up, and each child was given the amount they had earned for that week. If they decided not to do any chores that week, they didn't receive an allowance. It may have been a harsh lesson, but, each child learned the value of not only money, but, work also.

Posted by Karen on August 20, 2009 8:42 PM

.................................

I always had a difficult time remembering if I had given my daughter her weekly allowance. So at age nine, I gave her one of my old check books from a closed account. Each week I "deposited" her allowance into "Mom's Bank" and she would write down the amount of the deposit on the check register. This gave us a history of when allowance was given. When we went shopping she had to have her check book with her so she could determine if she had enough money to buy what she wanted. If she didn't have the money in her "checking account," she couldn't buy it. I told her I was not a Savings and Loan. If she had the money, she would write me a check for the amount of money she needed, enter the amount of check into her check register and I would give her the cash. She learned how to save, how to budget her money, how to balance a checkbook and the value of a dollar.

Posted by Pam on August 20, 2009 10:53 PM

.................................

When I turned 12, my parents opened a checking account for me at their bank. From 7th grade on, I was responsible for purchasing all of my clothes and school supplies. I also had to have a certain amount in my savings account at the end of each school year to be used for college.

It made me a bargain shopper and I learned how to prioritize my spending. If I wanted to go to a concert with my friends, I had the money but I would have to spend less on clothes.

Posted by Wanda on August 21, 2009 9:45 AM

.................................

You guys are great parents! My mother never taught me how to do any of that stuff, now I realize that she didn't teach me because she didn't know her self. I'm now on the way to learning - it's a bumpy ride.

Posted by anonymous on August 21, 2009 3:00 PM

.................................

when we go away, we give the kid a visa gift card. it may cost a few bucks but if she loses it, i can get the money back.

she can buy whatever she wants with it, but she has to keep track of her spending. she saves her receipts and adds them together.

the card makes her stop and really think about what she is buying and how much she will have left.
the first time we did it, she had a $100 card. she came home after vacation with $20 still on it.

Posted by anonymous on August 28, 2009 4:20 AM

.................................

When our children (4) were young we gave them the "family allowance" with certain restrictions as other families do. We talked about "when you go to college" often and as a result they all did. We "made a deal" with them - if they continued to live at home and go to college we would give them all a "free ride" in school.

However, here's the "hook". They had to work for one year between high school and college at any job they could find - they also had to pay "rent" which was a portion of the monthly food, utilities and their portion of the car insurance. They all agreed. They were given an invoice on the first of the month payable by the 5th and if they were late we assessed a $5.00 late charge. We wanted them to see that life wasn't very luxurious on a chicken fryers salary. Each got a job and paid as agreed. When they got this job we went to our local bank with them and opened a joint checking account so they could obtain a debit card and a small line of credit ($600.00) for overdraft protection. They also obtained a credit card with a $1,000. limit (jointly). This was a few years ago and we had to be joint on the accounts in order for them to qualify because they had no credit rating.

Monthly we would go over the accounts and either "coach" or "praise" and slowly they began to create credit and learn the importance of fiscal responsibility. They each enrolled at the local university and began their college careers. They continued to use their accounts responsibly and when they graduated from college as their graduation present - we paid off their credit card and line of overdraft protection.

When they left our home to tackle the world they had no debt - no student loans, no credit cards and a college education. They were free to be what they wanted to be and start out with a clean slate.

I can't tell you how many times they have told us that was the best graduation gift they could have ever gotten. We owe it to our children to teach them these life skills - not just push them out into the world unprepared. They still laugh about the monthly invoices and the late charge -but they know it worked. After all when you're late on your credit card payment - you have late charges.

PS: The "rent" was saved for each and used for part of the the payoff at graduation. Today they are all wonderful responsible adults teaching their children what they were taught. Life is good!!!!

Posted by Grannysmithe on August 30, 2009 10:29 AM

.................................

We never paid our children to do chores. Chores were part of their responsibility, as members of the household. Their allowances were very small, however, we paid for appropriate activities. They had jobs as soon as they were old enough.

Any money they received as gifts they saved half of. We encouraged them to live away at school so that they could have the whole college experience, as we did. However, they worked each summer and contributed their earnings.

Posted by anonymous on September 10, 2009 3:37 PM

.................................

My husband and I come from two different financial backgrounds. His parents kept up with Jones by going in debt and my parents had no debt and lived way below their means to the point of feeling guilty if they weren't constantly saving. We decided to raise our kids in an environment somewhere in between.

They didn't get everything they wanted growing up & heard no a lot, but both say they never felt like they did without. We didn't reward then monetarily for making good grades, but verbally. We also didn't have a regular allowance system. Their pocket money came from dog/housesitting, babysitting & gifts. They participated in extracurricular activities and sports which we paid the fees.

Once our daughters turned 16, they wanted to work. They got jobs at McDonald's and opened checking accounts. To keep the jobs, which they wanted to do once summer was over, they had to maintain their grades during the school year. We bought used cars (for cash, so not the greatest) for them, but upkeep & insurance were their responsibility. If they got a ticket, they had to pay for it. They were also responsible for paying for their cell phones and majority of their clothing.

We told them to save first and then live off the remainder. They learned about having an emergency fund for unexpected expenses. We also were very open with our kids about our financial decisions- good & bad. We discouraged them from getting credit cards when they were bombarded with offers upon graduating high school. We told them if they didn't need them why bother as they had the convenience of debit cards. We also told them to hold off getting student loans until it became necessary. They saw classmates using the money for ridiculous things having no bearing on their education and agreed. They don't want to be thousands of dollars in debt upon graduating.

We taught them it doesn't matter what you have coming in if it is all going out so have balance in your finances. We also told them not to worry about keeping up with the Jones as they might not want their bills.

Posted by judy on September 23, 2009 11:05 AM

.................................

-----------------------------------------

Share Your Comments:

Comments may need to be approved before they are displayed.

Comments:

Name (leave blank if you want to be anonymous):

Email Address (your email address will not be displayed):

Website URL (not required; please do not include "http://"):