My husband and I struggled to teach financial responsibility to our kids for years, so I thought I’d share some strategies that worked well for us. Unfortunately, many parents don’t talk to their children about money. It is best to start when they are young so you have plenty of time to work out the kinks.
How to Teach Financial Responsibility to Your Kids
We have 2 daughters, ages 24 and 15, and a 27-year-old son. Since we consider ourselves to be financially responsible, we hope that we imparted good money lessons to our children.
There were several methods we used to impart financial wisdom to them. We gave them allowances, paid them for certain chores, and offered to reward them with money for A’s on their report cards. Our main focus was to make sure they understood how money works and that certain things are luxuries and not needs.
Related: Should Kids Receive an Allowance?
Ways to Help Your Children Understand Money-4 Options
- Follow the 10-10-80 rule-which is 10% giving, 10% saving, and 80% is theirs to spend. This strategy will help your child understand the importance of saving. To get our kids excited to save, we offered to match the amount they saved each year. Watching their accounts grow encouraged them to continue saving. It can also be fun for them to select a charity to send their giving percentage to. They will feel good knowing that they are helping someone in need. You can help them create a budget for the remaining 80%. Learning how to handle smaller amounts of money now will come in handy when they are older and managing larger amounts.
- Just give them the money and let them learn what to do with it on their own. They will learn money management by watching how you handle money.
- Sit them down and show them your budget so they can understand how money flows in a household.
- Allow the child to be responsible for a bill in the house, like groceries. This will teach them how to comparison shop and live within a budget.
We primarily followed the 10-10-80 rule, while implementing some of the other options as well. When the children were old enough to get a part-time job, they were responsible for purchasing their clothing and personal needs, which helped them learn about money while still living at home.
Help Them Learn From You
There are so many ways you can teach financial responsibility to your kids, but one of the best ways they will learn is by watching how you handle money. They will need to see you making smart money moves when spending, saving, and giving to others. Show them how you handle your finances and talk to them about money, so they can become good stewards of the money they earn now and in the future.
Related: Should Kids Get Paid for Chores?
In what ways are you teaching financial responsibility to your kids? Do you have any additional tips to add? Let me know in the comments!
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I really feel like this is all on our example as kids. We need to learn to be good money managers then our children will as well. This is a very important thing to teach because it affects them for the rest of their life. THanks for linking up at Family Joy Blog Link Up this week.
I’m glad you enjoyed the post. It is so true…financial literacy begins with us! Thanks for commenting!
Yes! This mirrors what we’ve been doing in our home. Our oldest is 8 and earns a weekly allowance that he must divvy up in three ways: Give, Save, Spend. I got the idea from reading The Opposite of Spoiled and it seems to going well! In addition, my husband and I model frugality and answer questions about what we choose to spend money on and what we don’t. It makes us think, too! Great post!
That’s great, Dara! I’m glad it’s working for you. Thank you for stopping by and commenting. 🙂
Another idea: if they are old enough (teenager) and you meet with a financial planner, let them come with you. Ask your planner to specifically gear a discussion about your families finances and plans so they are included in things like their college tuition funds. There are advisors out there that specifically gear towards family-based financial planning.
That’s a great idea! Never too early!
This is so important to know as parents! Thank you for sharing!
You’re welcome! Thanks for reading and stopping by! 🙂
I don’t have kids but there were some things my single mom did to teach me financial management when I was growing up that served me very well. I paid for my own expenses, including clothes (aside from back to school once per year shopping day), cell phone, gas, and car insurance. I also paid for half of my car, and my mom paid for the other half. That motivated me to save aggressively from the income of my job at a bookstore. I also got a checking account and was expected to balance it every Sunday. I also tithes 10%. I’ve been frugal ever since, and held onto the self discipline I learned in high school throughout college and adulthood.
That is so awesome! I can only hope my kids learn those lessons and turn out as frugal and money wise as you are! Thanks so much for sharing!
I think it’s essential that children start learning about money at a young age – just as essential as learning to brush their teeth and not talk to strangers. I’d like to add on to your 10-10-80 rule…Spending, Saving, Donating, and Investing. Kids save for the things they want soon, but invest for things that may be more abstract to them at this point but will serve their futures well, like university, a wedding, a first home.
I really like your idea of adding investing into the mix! I’ll have to research some ways to get the kids involved. Thanks!
Excellent post. I started teaching my daughters this lesson at a young age. Now that they are teens I’m seeing the benefits. They both budget for everything. They are both very frugal. They understand the difference between need and want and thing’s being out of the budget. Kudos to your family for teaching such a valuable lesson.
That’s wonderful! It’s so important for children to learn about money at a young age. It’s refreshing to know that both of your daughters are frugal and budget their money. Music to my ears! Great job! 🙂
We also follow a 10-10-80 rule, my dad did this with me, the first 10 went to board and lodging, 10 to saving and 80 for spending. When I got married he gave us the money that I thought I had been paying for board and lodging. My kids get an allowance and when it is spent, too bad till next month. I wish I could do this with my husband as he was never taught about fiscal management and grew up extremely wealthy, until his father lost the business the year we got married. 23 years later he still struggles!
It’s nice to know others follow the same money rules. That’s so cool that your father saved the money you paid for board and lodging. What a great wedding present! That has me thinking now… 🙂
I can imagine it’s not easy to teach children financial responsibility. In fact, I am sure there are others who say you should protect children from some of the harsh realities until they are much older. But I applaud you for laying a good foundation.
A lot of children are like your youngest – holding on to their own money but wanting to spend yours. They usually outgrow it or people stop footing the bills so they have no choice but to change.
Thank you! Yes, I have started telling her that her allowance is for her to purchase the things she wants and if she doesn’t have enough for it, she has to save the money. So far so good…we’ll see!