Moms Talk Financial Responsibility with Kids

Each week in Moms Talk, our Moms Council of experts and smart moms takes your questions, gives advice and shares solutions. So grab a cup of coffee and settle in as we start the conversation today with this question:

How do you teach your children financial responsibility?

Kim Koch:

 How do you teach your child to curb spending desires, cut their financial spending down to basic needs and save? They learn by example. If they see you making wiser choices, at some point it will resonate loudly to them.

They hear words like recession and balanced budget in the news. They see their family spending less and trying to save more with an uncertain future.

Turn off lights behind them, and tell them why you are doing it. Run the dryer only during cooler parts of the day in the summer, or hang your clothing out on a line. Bake more in the winter months to help heat the house. Cancel the cable and get a much cheaper membership. Fill your home with books from the public library.

Use the money they are given and convert it to savings bonds or put it in a savings account.

When they hit middle school and have the ability to earn some funds themselves, take a financial literacy course together as a family. Have them put a percentage of everything they earn into their savings.
Shop off of clearance racks, make a list before you go to the grocery store and plan family meals ahead of time. Also plan for school lunches to pack, so there is less chance of impulse buying. Use gift cards with set values so they can decide what they need and if what they want is really in their budget.

During the high school years, activities can eat away at funds. Plan games nights, do crafts or carpool to school or work.

Jan Katz-Kellogg:

In a world where technology drives most businesses today, the value of a dollar isn’t taught half so easily as it was when we actually handled cash money. Today with a sudden impulse and a few clicks, we can buy most anything. That is really scary for a parent whose teen has mastered the internet. It is just now becoming clear to my son that credit cards are not an even exchange for cash, but a loan. The reason it’s becoming clear is because the older he gets, the more expensive his toys are. Thankfully, there are some really great tools out there to help teach him what it takes to get those toys and have him be accountable for those purchases. I have used all of the following at some point to help my teen learn how to handle money:
 
Go To An Auto Dealer and Have A Loan Explained My son is about to turn 16 and, of course, is dreaming about cars. After a trip to Carmax, picking out a car he liked and having the financing explained to him by the salesman, he was very quiet. It was that initial shock of what it actually took to get a car. I’m sure we’ll get him a car that doesn’t require a loan from a dealer for his first car, but he’ll have a better appreciation of the process. Plus, he’ll learn soon enough that most of the big purchases in his life will utilize that same loan process.
 
Savings Account Get in the habit of having him/her deposit a certain amount for “the future."  Sit down and show what putting a little money each month translates to 15 years from now with interest—it’s impressive.
 
Checking Account My mother had me open up a checking account when I was in seventh grade so I could learn how to manage money. Many of my checks were to Hallmark Card for $2 or $3 but it taught me to balance a checkbook and I felt very grown up. It will also show them, in a way you never could, that money goes fast and must be utilized wisely.

VISA, American Express Gift Cards In denominations of $25 and up, these cards can be great tools for teaching money management and giving your teen a feeling of independence and maturity.
 
Trak, Go Phones with set # of minutes Although we don’t do this now, it was very helpful when I first allowed my child to have a cell phone. At first he would use the minutes up quickly and be upset. I would give him ways to earn extra minutes. He learned pretty quickly how to manage those minutes.
 
The Value Of A Sale I rarely buy anything for full retail price. I shop sales, outlet malls, thrift stores and use coupons. Although my son wouldn’t be caught dead in anything from a thrift store, he has learned by example to look for bargains.
 
Teaching Priorities When my child just “has to have” the latest thing, it’s put on a priority list. It’s interesting to see how the “have to haves” drop in priority after a week or two, replaced by another ”have to have." If something stays on the list and shows no sign of disappearing, we look at Christmas, birthday or extra jobs as available options.
 
The Value Of Building Credit This is probably the most important financial lesson I would like my son to learn. Show and explain to him/her what a credit report is, how it works and why it will be a major influence on his future lifestyle. Those credit reports reflect someone who takes responsibilities seriously, makes good choices and follows through on commitments. His credit report is a resume he’ll need for every major purchase in his life. You may want to co-sign for a credit card with a $300 limit to help your teen start building credit.
 
Finally, I think our kids learn best by the walking, breathing examples around them—us. If we expect them to have a successful financial future, we have to practice what we preach. If your child grows up watching you live on a set budget, within your means, respecting the value of a dollar, chances are he or she will do that, too.